Orion performs ongoing evaluations of its customers and continuously monitors collections and payments. Orion estimates an allowance for credit losses based upon the historical collectability based on past due status and makes judgments about the creditworthiness of customers based on ongoing credit evaluations. We also consider customer-specific information, current market conditions, and reasonable and supportable forecasts of future economic conditions.

Accordingly, revenue is recognized on a gross basis. For certain sales, primarily software subscriptions and renewals, Orion ~~continues~~is the sales agent providing access to ~~review~~ the ~~provisions~~content and recognize commission revenue net of ~~ASC 606 against a sample~~amounts due to third parties who fulfill the performance obligation. For these sales, control passes at the point in time upon providing access of ~~its customer contracts~~the content to ~~determine~~ the ~~impact, if any, on the timing, measurement and presentation~~customer.

The sale of ~~revenue recognition and the cost of goods~~installation and services ~~sold. The review considers, among other matters,~~related to the ~~evaluation~~EV charging business is presented in Service revenue. Revenue from the EV segment that includes both the sale of product and ~~identification of distinct~~service is allocated between the product and service performance obligations ~~measurement~~based on relative standalone selling prices, and is recorded in Product revenue and Service revenue, respectively, in the Condensed Consolidated Statement of ~~Orion's progress toward satisfying identified~~Operations.

Revenue from the maintenance offering that includes both the sale of Orion manufactured or sourced product and service is allocated between the product and service performance obligations based on relative standalone selling prices, and ~~variable consideration~~is recorded in Product revenue and Service revenue, respectively, in the ~~form~~Condensed Consolidated Statement of Operations.

The following tables provide detail of Orion’s total revenue for the three months ended June 30, 2023 and June 30, 2022 (dollars in thousands):


	Three Months Ended June 30, 2023
	Product		Services		Total
Revenue from contracts with customers:
Lighting product and installation	$	11,785	$	831	$	12,616
Maintenance services		899		2,855		3,754
Electric vehicle charging		982		256		1,238
Total revenues from contracts with customers		13,666		3,942		17,608
Revenue accounted for under other guidance		5		—		5
Total revenue	$	13,671	$	3,942	$	17,613

	Three Months Ended June 30, 2022
	Product		Services		Total
Revenue from contracts with customers:
Lighting product and installation	$	12,404	$	1,358	$	13,762
Maintenance services		989		3,065		4,054
Solar energy related revenues		—		—		0
Total revenues from contracts with customers		13,393		4,423		17,816
Revenue accounted for under other guidance		90		—		90
Total revenue	$	13,483	$	4,423	$	17,906

From time to time, Orion sells the receivables from one customer ~~rebates, payment discounts and product returns.~~to a financing institution. The ~~Company's assessment is preliminary and may change as it finalizes its review. Since Orion does not expect ASC 606 to impact~~was no such activity during the ~~timing~~three months ended June 30, 2023 or 2022.

The following chart shows the balance of ~~its billings to~~Orion’s receivables arising from contracts with customers, ~~or the receipt of customer payments, there could be fluctuations in the amount of deferred costs and liabilities reflected on Orion's future balance sheets as compared to historical presentations.~~

~~Under ASC 606, incremental contract costs, which for Orion includes sales commissions and costs paid to independent contractors for field audits, are required to be capitalized as~~ contract assets and amortized over the period these costs are expected to be recovered. Although Orion incurs such costs, its contracts are typically completed within one year. As such, Orion's plans to elect the practical expedient providedcontract liabilities as of June 30, 2023 and March 31, 2023 (dollars in ~~ASC 606 and expense incremental contract costs when incurred.~~thousands):


	June 30, 2023		March 31, 2023
Accounts receivable, net	$	14,613	$	13,728
Contract assets	$	1,231	$	1,320
Contract liabilities	$	657	$	480

~~Orion is identifying the necessary~~

There were no significant changes in ~~its ongoing process for~~ the ~~review~~contract assets outside of standard reclassifications to accounts receivable, net upon billing. Deferred revenue, current as of June 30, 2023 and March 31, 2023, includes $0.7 million and $0.5 million, respectively, of contract liabilities which represent consideration received from a new customer ~~contracts~~contract on which installation has not yet begun and Orion has not fulfilled the identification of key terms impacting revenue recognition. Orion is also evaluating the necessary changes to its systems, revenue related processes and controls as a result of the new standard, including the related footnote disclosures.promises included.

~~ASC 606 permits the use of either a full retrospective or modified retrospective transition method.~~Orion will adopt the requirements of the new standard effective April 1, 2018 using the modified retrospective transition method with the cumulative effect to the opening balance of retained earnings recognized as of the date of initial adoption.

In May 2017, the FASB issued ASU 2017-09, “Compensation-Stock Compensation: Scope of Modification Accounting” which provides guidance about which changes to the terms or conditions of a share-based payment award would require an entity to apply modification accounting. The provisions of this standard are effective for Orion beginning on April 1, 2018. The adoption of this standard is not expected to have a material impact on Orion’s consolidated condensed financial statements.

~~Recently Adopted Standards~~

In November 2015, the FASB issued ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes,” to simplify the presentation of deferred taxes. The amendments in this update require that deferred tax assets and liabilities be classified as non-current on the balance sheet. This ASU is effective for Orion's annual reporting period, and interim periods therein, as of April 1, 2017. The adoption of this standard had no impact on Orion’s condensed consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” which changes the measurement principle for inventory from the lower of cost or market to the lower of cost or net realizable value for entities that measure inventory using first-in, first-out ("FIFO") or average cost. Net realizable value is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Orion adopted this standard as of April 1, 2017. The adoption of this standard had no impact on Orion's condensed consolidated financial statements as the previous measurement and validation of the carrying value of its inventory incorporated market values consistent with the net realizable value measurements of the standard.

In March 2016, the FASB issued ASU 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting," which changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as the classification of related matters in the statement of cash flows. Orion adopted this ASU as of April 1, 2017. As a result of adopting the income tax accounting provisions of this standard, Orion realized an increase in both its deferred tax assets related to stock-based compensation awards and the related valuation allowance. As Orion carries a full valuation allowance against its deferred tax assets, there was no net impact to its condensed consolidated balance sheets or statements of operations. In accordance with the provisions of this standard, Orion elected to prospectively adopt an accounting policy to recognize forfeitures as they occur in lieu of estimating forfeitures. The cashflow presentation provisions of the standard had no impact on Orion’s condensed consolidated financial statements. Finally, due to Orion's net loss, the modifications to the calculation of diluted earnings per share as a result of adopting this standard did not impact its diluted earnings per share.

NOTE 34 — ACCOUNTS RECEIVABLE,

NET

As of June 30, 2023 and March 31, 2023, Orion's accounts receivable and allowance for ~~doubtful accounts~~credit losses balances were as follows (dollars in thousands):


	June 30, 2023			March 31, 2023
Accounts receivable, gross	$	14,885		$	13,814
Allowance for credit losses		(272	)		(86	)
Accounts receivable, net	$	14,613		$	13,728

Changes in Orion’s allowance for credit losses were as follows (dollars in thousands):


	For the Three Months Ended June 30,
	2023			2022
Beginning of period	$	(86	)	$	(8	)
Credit loss expense		(190	)		(10	)
Write-off		4			—
End of period	$	(272	)	$	(18	)

December 31, 2017 March 31, 2017
Accounts receivable, gross $ 8,827
$ 9,315
Allowance for doubtful accounts (164 ) (144 )
Accounts receivable, net $ 8,663
$ 9,171

NOTE 45 — INVENTORIES,

NET

As of ~~December 31, 2017~~June 30, 2023 and March 31, ~~2017,~~2023, Orion's inventory balances were as follows (dollars in thousands):


	Cost		Excess and Obsolescence Reserve			Net
As of June 30, 2023
Raw materials and components	$	8,050	$	(1,171	)	$	6,879
Work in process		631		(173	)		458
Finished goods		10,938		(586	)		10,352
Total	$	19,619	$	(1,930	)	$	17,689

As of March 31, 2023
Raw materials and components	$	9,988	$	(1,094	)	$	8,894
Work in process		693		(135	)		558
Finished goods		9,313		(560	)		8,753
Total	$	19,994	$	(1,789	)	$	18,205

Cost Reserve Net
As of December 31, 2017
Raw materials and components $ 6,655
$ (1,406 ) $ 5,249
Work in process 1,316
(351 ) 965
Finished goods 4,385
(1,828 ) 2,557
Total $ 12,356
$ (3,585 ) $ 8,771

As of March 31, 2017
Raw materials and components $ 8,104
$ (1,807 ) $ 6,297
Work in process 1,918
(329 ) 1,589
Finished goods 7,044
(1,337 ) 5,707
Total $ 17,066
$ (3,473 ) $ 13,593

NOTE 56 — PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets ~~include~~consist primarily of prepaid insurance premiums, debt issue costs, prepaid subscription fees and sales tax receivable.

NOTE 7 — PROPERTY AND EQUIPMENT, NET

As of June 30, 2023 and March 31, 2023, property and equipment, net, included the following (dollars in thousands):


	June 30, 2023			March 31, 2023
Land and land improvements	$	433		$	433
Buildings and building improvements		9,491			9,491
Furniture, fixtures and office equipment		7,783			7,782
Leasehold improvements		540			540
Equipment leased to customers		4,997			4,997
Plant equipment		11,195			11,234
Vehicles		948			720
Construction in Progress		121			37
Gross property and equipment		35,508			35,234
Less: accumulated depreciation		(24,974	)		(24,764	)
Total property and equipment, net	$	10,534		$	10,470

December 31, 2017 March 31, 2017
Unbilled accounts receivable $ 1,034
$ 2,226
Other prepaid expenses 509
651
Total $ 1,543
$ 2,877

NOTE 68 — ~~PROPERTY AND EQUIPMENT~~

~~Property~~LEASES

From time to time, Orion leases assets from third parties. Orion also leases certain assets to third parties.

Orion accounts for leases in accordance with ASC 842. Under ASC 842, both finance and ~~equipment were comprised~~operating lease ROU assets and lease liabilities for leases with initial terms in excess of 12 months are recognized at the ~~following (dollars in thousands):~~

December 31, 2017 March 31, 2017
Land and land improvements $ 424
$ 424
Buildings and building improvements 9,245
9,245
Furniture, fixtures and office equipment 7,083
7,056
Leasehold improvements 324
324
Equipment leased to customers 4,997
4,997
Plant equipment 11,888
11,627
Construction in progress 196
61
34,157
33,734
Less: accumulated depreciation and amortization (20,944 ) (19,948 )
Property and equipment, net $ 13,213
$ 13,786

~~During~~commencement date based on the ~~second quarter~~present value of ~~fiscal 2018,~~lease payments over the lease term. Orion recognizes lease expense for leases with an initial term of 12 months or less, referred to as short term leases, on a ~~result~~straight-line basis over the lease term.

A summary of lower than anticipated operating results in the first half of fiscal 2018, Orion revised its full year fiscal 2018 forecast. As such, a triggering event occurred as of September 30, 2017, requiring Orion to evaluate its long-livedOrion’s assets for impairment. Due to the central nature of its operations, Orion’s tangible and intangible definite-lived assets support its full operations, are utilized by all three of its reportable segments, and do not generate separately identifiable cash flows. As such, these assets together represent a single asset group. In reviewing the asset group for impairment, Orion elected to bypass the qualitative impairment assessment and went directly to performing the Step 1 recoverability test. Orion performed the Step 1 recoverability test for the asset group comparing its carrying value to the group’s expected future undiscounted cash flows. Orion concluded that the undiscounted cash flows of the definite lived asset group exceeded its carrying value. As such the asset group was deemed recoverable and no impairment was recorded. No triggering event occurred in the quarter ended December 31, 2017, so no impairment review was conducted.

~~Equipment included above under capital leases was as~~leased from third parties follows (dollars in thousands):


	Balance sheet classification	June 30, 2023		March 31, 2023
Assets
Operating lease assets	Other long-term assets	$	2,349	$	2,174
Liabilities
Current liabilities
Operating lease liabilities	Accrued expenses and other	$	923	$	823
Non-current liabilities
Operating lease liabilities	Other long-term liabilities		1,870		1,826
Total lease liabilities		$	2,793	$	2,649

December 31, 2017 March 31, 2017
Equipment $ 581
$ 581
Less: accumulated depreciation and amortization (308 ) (202 )
Equipment, net $ 273
$ 379

Orion ~~recorded depreciation expense~~had operating lease costs of ~~$0.4 and $1.1~~$0.4 million for the three ~~and nine~~ months ended ~~December 31, 2017, respectively, and $0.3 and $1.1~~June 30, 2023. Orion had operating lease costs of $0.3 million for the three ~~and nine~~ months ended ~~December~~June 30, 2022.

The estimated maturity of lease liabilities for each of the next five years is shown below (dollars in thousands):


Maturity of Lease Liabilities	Operating Leases
Fiscal 2024 (period remaining)	$	785
Fiscal 2025		1,083
Fiscal 2026		984
Fiscal 2027		177
Fiscal 2028		—
Thereafter		—
Total lease payments	$	3,029
Less: Interest		(236	)
Present value of lease liabilities	$	2,793

Assets Orion Leases to Other Parties

One of Orion’s frequent customers purchases products and installation services under agreements that provide for monthly payments, at a fixed monthly amount, of the contract price, plus interest, typically over a five-year period. While Orion retains ownership of the light fixtures during the financing period, the transaction terms and the underlying economics associated with used lighting fixtures results in Orion essentially ceding ownership of the lighting fixtures to the customer after completion of the agreement. The portions of the transaction associated with the sale of the light fixtures is accounted for as a sales-type lease under ASC 842. The total transaction price in these contracts is allocated between the lease and non-lease components in the same manner as the total transaction price of other turnkey projects containing lighting fixtures and installation services.

Revenues, and production and acquisition costs, associated with sales-type leases are included in Product revenue and Costs of product revenues in the Condensed Consolidated Statement of Operations. There was no revenue and cost of sales arising from sales-type leases during the three months ended June 30, 2023 and June 30, 2022.

NOTE 9 — GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Orion has $0.9 million of goodwill related to its purchase of Voltrek in the third quarter of fiscal 2023, which has an indefinite life, and is assigned to the EV Charging operating segment.

Orion has $0.6 million of goodwill related to its purchase of Stay-Light Lighting during fiscal year 2022, which has an indefinite life, and is assigned to the Maintenance operating segment.

See Note 18 – Acquisition for further discussion of the Voltrek acquisition.

As of June 30, 2023 and March 31, ~~2016, respectively.~~

~~NOTE 7 — INTANGIBLE ASSETS~~

~~The~~2023, the components of, and changes in, the carrying amount of other intangible assets, net, were as follows (dollars in thousands):


	June 30, 2023									March 31, 2023
	Gross Carrying Amount		Accumulated Amortization			Net		Weighted Average Useful Life		Gross Carrying Amount		Accumulated Amortization			Net
Amortized Intangible Assets
Patents	$	2,521	$	(1,956	)	$	565		8.5	$	2,521	$	(1,930	)	$	591
Licenses		58		(58	)		—		—		58		(58	)		—
Trade name and trademarks		464		(94	)		370		4.0		464		(73	)		391
Customer relationships		5,509		(4,041	)		1,468		6.3		5,509		(3,914	)		1,595
Vendor relationships		2,600		(275	)		2,325		3.4		2,600		(183	)		2,417
Developed technology		900		(900	)		—		—		900		(900	)		—
Total Amortized Intangible Assets	$	12,052	$	(7,324	)	$	4,728		5.5	$	12,052	$	(7,058	)	$	4,994

Indefinite-lived Intangible Assets
Trade name and trademarks	$	1,010	$	—		$	1,010			$	1,010	$	—		$	1,010
Total Non-Amortized Intangible Assets	$	1,010	$	—		$	1,010			$	1,010	$	—		$	1,010

December 31, 2017 March 31, 2017
Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net
Patents $ 2,702
$ (1,331 ) $ 1,371
$ 2,658
$ (1,211 ) $ 1,447
Licenses 58
(58 ) —
58
(58 ) —
Trade name and trademarks 1,005
—
1,005
1,715
—
1,715
Customer relationships 3,600
(3,286 ) 314
3,600
(3,054 ) 546
Developed technology 900
(546 ) 354
900
(426 ) 474
Non-competition agreements 100
(90 ) 10
100
(75 ) 25
Total $ 8,365
$ (5,311 ) $ 3,054
$ 9,031
$ (4,824 ) $ 4,207

During the second quarter of fiscal 2018, as a result of lower than anticipated operating results in the first half of fiscal 2018, Orion revised its full year fiscal 2018 forecast. As such, a triggering event occurred as of September 30, 2017, requiring Orion to evaluate its long-lived assets for impairment. Orion performed a quantitative impairment review of its indefinite lived intangible assets related to the Harris trade name applying the royalty replacement method to determine the asset’s fair value as of September 30, 2017. Under the royalty replacement method, the fair value of the Harris tradename was determined based on a market participant’s view of the royalty that would be paid to license the right to use the tradename. This quantitative analysis incorporated several assumptions including forecasted future revenues and cash flows, estimated royalty rate, based on similar licensing transactions and market royalty rates, and discount rate, which incorporates assumptions such as weighted-average cost of capital and risk premium. As a result of this impairment test, the carrying value of the Harris trade name exceeded its estimated fair value and an impairment of $0.7 million was recorded to Impairment of intangible assets during the quarter ended September 30, 2017 to reduce the asset’s carrying value to its calculated fair value. No triggering event occurred in the quarter ended December 31, 2017, so no impairment review was conducted. This fair value determination was categorized as Level 3 in the fair value hierarchy.

Amortization expense on intangible assets was ~~$0.2~~$0.3 million for ~~both~~ the three months ended ~~December 31, 2017 and 2016.~~

June 30, 2023, respectively.

Amortization expense on intangible assets was ~~$0.5 and $0.7~~$0.1 million for the ~~nine~~three months ended ~~December 31, 2017 and 2016,~~June 30, 2022, respectively.

~~As of December 31, 2017, the weighted average remaining useful life of intangible assets was 5.7 years.~~

The estimated amortization expense for the remainder of fiscal ~~2018,~~2024, the next five fiscal years and beyond is shown below (dollars in thousands):


Fiscal 2024 (period remaining)	$	820
Fiscal 2025		1,086
Fiscal 2026		848
Fiscal 2027		589
Fiscal 2028		518
Fiscal 2029		471
Thereafter		396
Total	$	4,728

Fiscal 2018 (period remaining) $ 138
Fiscal 2019 449
Fiscal 2020 363
Fiscal 2021 289
Fiscal 2022 191
Fiscal 2023 166
Thereafter 453
Total $ 2,049

NOTE 810 — ACCRUED EXPENSES AND OTHER ~~LONG-TERM LIABILITIES~~

~~Accrued~~

As of June 30, 2023 and March 31, 2023, accrued expenses and other ~~include~~included the following (dollars in thousands):


	June 30, 2023		March 31, 2023
Accrued acquisition earn-out	$	3,000	$	3,000
Other accruals		2,162		2,598
Compensation and benefits		1,818		1,412
Credits due to customers		1,122		1,310
Accrued project costs		971		1,218
Warranty		502		497
Sales returns reserve		69		71
Sales tax		325		274
Legal and professional fees		76		172
Total	$	10,045	$	10,552

December 31, 2017 March 31, 2017
Compensation and benefits $ 1,823
$ 2,431
Sales tax 202
213
Contract costs 515
223
Legal and professional fees 1,955
2,262
Warranty 347
449
Other accruals 313
410
Total $ 5,155
$ 5,988

~~Other long-term liabilities includes the following (dollars in thousands):~~

December 31, 2017 March 31, 2017
Warranty $ 270
$ 310
Medical benefits 126
—
Unrecognized tax benefits 113
113
Other —
19
Total $ 509
$ 442

Orion generally offers a limited warranty of one to ten years on its lighting products, ~~in addition to those~~including the pass through of standard warranties offered by major original equipment component manufacturers. The manufacturers’ warranties cover lamps, power supplies, LED modules, chips and drivers, control devices, and ~~ballasts,~~other fixture related items, which are significant components in Orion's lighting products.

Changes in Orion’s warranty accrual (both current and long-term) were as follows (dollars in thousands):


	For the Three Months Ended June 30,
	2023			2022
Beginning of period	$	646		$	860
Accruals		64			167
Warranty claims (net of vendor reimbursements)		(56	)		(216	)
End of period	$	654		$	811

Three Months Ended December 31, Nine Months Ended December 31,
2017 2016 2017 2016
Beginning of period $ 739
$ 1,114
$ 759
$ 864
Provision to product cost of revenue (122 ) (190 ) (138 ) 61
Charges —
(2 ) (4 ) (3 )
End of period $ 617
$ 922
$ 617
$ 922

NOTE 911 — NET LOSS PER COMMON SHARE

Basic net ~~loss~~income per common share is computed by dividing net ~~loss~~income attributable to common shareholders by the weighted-average number of common shares outstanding for the period and does not consider common stock equivalents.

Diluted net income per common share reflects the dilution that would occur if stock options were exercised and restricted shares vested. In the computation of diluted net income per common share, Orion uses the treasury stock method for outstanding options and restricted shares. For the three ~~and nine~~ months ended ~~December 31, 2017~~June 30, 2023 and ~~2016,~~2022, Orion was in a net loss position; therefore, the ~~basic~~Basic and ~~diluted weighted average~~Diluted weighted-average shares outstanding are equal because any increase to the basic shares would be anti-dilutive. Net ~~loss~~(loss) income per common share is calculated based upon the ~~following:~~following shares:


	For the Three Months Ended June 30,
	2023			2022
Numerator:
Net loss (in thousands)	$	(6,637	)	$	(2,835	)
Denominator:
Weighted-average common shares outstanding		32,345,823			31,138,398
Weighted-average common shares and common share equivalents outstanding		32,345,823			31,138,398
Net loss per common share:
Basic	$	(0.21	)	$	(0.09	)
Diluted	$	(0.21	)	$	(0.09	)

Three Months Ended December 31, Nine Months Ended December 31,
2017 2016 2017 2016
Numerator:
Net loss (in thousands) $ (1,433 ) $ (1,086 ) $ (11,666 ) $ (4,996 )
Denominator:
Weighted-average common shares outstanding 28,909,847
28,258,742
28,734,394
28,106,209
Weighted-average common shares and common share equivalents outstanding 28,909,847
28,258,742
28,734,394
28,106,209
Net loss per common share:
Basic $ (0.05 ) $ (0.04 ) $ (0.41 ) $ (0.18 )
Diluted $ (0.05 ) $ (0.04 ) $ (0.41 ) $ (0.18 )

The following table indicates the number of potentially dilutive securities excluded from the calculation of ~~diluted~~Diluted net ~~loss~~income per common share because their inclusion would have been anti-dilutive. The number of shares ~~are~~is as of the end of each period:


	For the Three Months Ended June 30,
	2023		2022
Common stock options		—		115,782
Restricted shares		582,506		1,081,452
Total		582,506		1,197,234

December 31, 2017 December 31, 2016
Common stock options 709,667
1,561,953
Restricted shares 1,545,209
1,661,543
Total 2,254,876
3,223,496

NOTE ~~10 — RELATED PARTY TRANSACTIONS~~

During the three months ended December 31, 2017, Orion did not have any related party transactions. During the nine months ended December 31, 2017, Orion incurred a de minimis expense for consulting services provided by a member of its Board of Directors. During the three and nine months ended December 31, 2016, Orion purchased goods and services from an entity in the amount of approximately twenty-one thousand and fifty-three thousand dollars, respectively, at which time a director of Orion served as a minority owner and as the president and chairman of the board of directors of the entity.

~~NOTE 11~~12 — LONG-TERM DEBT

Long-term debt consisted of the following (dollars in thousands):


	June 30, 2023			March 31, 2023
Revolving credit facility	$	10,000		$	10,000
Equipment debt obligations		16			20
Total long-term debt		10,016			10,020
Less current maturities		(16	)		(17	)
Long-term debt, less current maturities	$	10,000		$	10,003

December 31, 2017 March 31, 2017
Revolving credit facility $ 3,622
$ 6,629
Equipment lease obligations 204
321
Customer equipment finance notes payable 6
7
Other long-term debt —
14
Total long-term debt 3,832
6,971
Less current maturities (85 ) (152 )
Long-term debt, less current maturities $ 3,747
$ 6,819

Revolving Credit Agreement

On December 29, 2020, Orion ~~has an amended~~entered into a new $25 million Loan and Security Agreement with Bank of America, N.A., as lender (the “Credit Agreement”). The Credit Agreement replaced Orion’s prior $20.15 million secured revolving credit and security agreement ("(the “Prior Credit ~~Agreement"~~Agreement”) ~~that~~.

The replacement of the Prior Credit Agreement with the Credit Agreement provides Orion with increased financing capacity and liquidity to fund its operations and implement its strategic plans.

Effective November 4, 2022, Orion, with Bank of America, N.A. as lender, executed Amendment No. 1 to its Credit Agreement. The primary purpose of the amendment was to include the assets of the acquired subsidiaries, Stay-Lite Lighting, Inc. ("Stay-Lite Lighting") and ~~includes a $2.0 million sublimit for the issuance of letters of credit. As of December 31, 2017, Orion had no outstanding letters of credit. Borrowings outstanding~~Voltrek, as of December 31, 2017, amounted to approximately $3.6 million and are included in non-current liabilities in the accompanying condensed consolidated balance sheet. Orion estimates that as of December 31, 2017, it was eligible to borrow an additional $0.2 millionsecured collateral under the Credit ~~Facility based upon current levels~~Agreement. Accordingly, eligible assets of ~~eligible inventory~~Stay-Lite and ~~accounts receivable.~~

~~Subject~~Voltrek will be included in ~~each case to Orion's applicable~~the borrowing base ~~limitations,~~calculation for the purpose of establishing the monthly borrowing availability under the Credit Agreement. The amendment also clarified that the earn-out liabilities associated with the Stay-Lite and Voltrek transactions are permitted under the Credit Agreement ~~otherwise provides for a $15.0 million Credit Facility. This limit may increase to $20.0 million based on a borrowing base requirement, if Orion satisfies certain conditions. Orion did not meet~~and that the ~~requirements to increase the borrowing limit to $20.0 million as of July 31, 2017, the most recent measurement date.~~

~~From and after any increase~~expenses recognized in connection with those earn-outs should be added back in the ~~Credit Facility limit from $15.0 million to $20.0 million,~~computation of EBITDA, as defined, under the Credit ~~Agreement requires that Orion maintain, as~~Agreement.

As of the end of each month, a minimum ratio for the trailing twelve-month period of (i) earnings before interest, taxes, depreciation and amortization, subject to certain adjustments, to (ii) the sum of cash interest expense, certain principal payments on indebtedness and certain dividends, distributions and stock redemptions, equal to at least 1.10 to 1.00. The Credit Agreement contains additional customary covenants, including certain restrictions on Orion’s ability to incur additional indebtedness, consolidate or merge, enter into acquisitions, guarantee obligations of third parties, make loans or advances, declare or pay any dividend or distribution on Orion’s stock, redeem or repurchase shares of Orion’s stock, or pledge or dispose of assets.June 30, 2023, Orion was in compliance with ~~its covenants in the Credit Agreement as of December 31, 2017.~~

~~Each subsidiary of Orion is a joint and several co-borrower or guarantor under the Credit Agreement, and the Credit Agreement is secured by a security interest in substantially~~ all ~~of Orion’s and each subsidiary’s personal property (excluding various assets relating to customer Orion Throughput Agreements ("OTAs") and a mortgage on certain real property.~~

Borrowings under the Credit Agreement bear interest at the daily three-month LIBOR plus 3.0% per annum, with a minimum interest charge for each year or portion of a year during the term of the Credit Agreement of $0.1 million, regardless of usage. As of December 31, 2017, the interest rate was 4.69%. Orion must pay an unused line fee of 0.25% per annum of the daily average unused amount of the Credit Facility and a letter of credit fee at the rate of 3.0% per annum on the undrawn amount of letters of credit outstanding from time to time under the Credit Facility.

~~Harris Seller's Note~~

On July 1, 2013, Orion issued an unsecured and subordinated promissory note in the principal amount of $3.1 million to partially fund the acquisition of Harris Manufacturing, Inc. and Harris LED, LLC (collectively, "Harris"). The note's interest rate was 4% per annum. Principal and interest were payable quarterly. The note matured in July 2016 and was paid in full upon maturity.

debt covenants.

Equipment ~~Lease~~Debt Obligations

In ~~March 2016 and June 2015,~~February 2019, Orion entered into ~~lease~~additional debt agreements with a financing company in the principal amount of ~~nineteen~~$44 thousand ~~dollars~~ and ~~$0.4 million, respectively,~~$30 thousand to fund the purchase of certain equipment. The ~~leases~~debts are secured by the related equipment. The ~~leases~~debts bear interest at a rate of ~~5.9%~~6.43% and ~~3.6%,~~8.77% per annum, respectively, and both debts mature in ~~February 2018 and June 2020. Both leases contain a one dollar buyout option.~~January 2024.

~~Customer Equipment Finance Notes Payable~~

In December 2014, Orion entered into a secured borrowing agreement with a financing company in the principal amount of $0.4 million to fund completed customer contracts under its OTA finance program that were previously funded under a different OTA credit agreement. The loan amount is secured by the OTA-related equipment and the expected future monthly payments under the supporting 25 individual OTA customer contracts. The borrowing agreement bears interest at a rate of 8.36% and matures in April 2018.

In June 2011, Orion entered into a note agreement with a financial institution that provided Orion with $2.8 million to fund completed customer contracts under Orion’s OTA finance program. The note bore interest at 7.85%. The note matured in April 2016 and was paid in full upon maturity.

~~Other Long-Term Debt~~

In September 2010, Orion entered into a note agreement with the Wisconsin Department of Commerce that provided Orion with $0.3 million to fund Orion’s rooftop solar project at its Manitowoc facility. This note is included in the table above as other long-term debt. The note is collateralized by the related solar equipment. The note allowed for two years without interest accruing or principal payments due. Beginning in July 2012, the note bears interest at 2% and requires monthly payments of four thousand six hundred. The note matured in June 2017 and was paid in full upon maturity.

NOTE 1213 — INCOME TAXES

~~The~~

Orion’s income tax provision ~~for the three months ended December 31, 2017~~ was determined by applying an estimated annual effective tax rate, ~~of 1.6%~~based upon the facts and circumstances known, to ~~loss~~book income (loss) before income ~~tax. The estimated~~tax, adjusting for discrete items. Orion’s actual effective tax rate is adjusted each interim period, as appropriate, for changes in facts and circumstances. For the three ~~month period~~months ended ~~December 31, 2016 was 0.1%. The estimated effective~~June 30, 2023 and 2022, Orion recorded income tax ~~rate was determined by applying statutory tax rates to pretax loss adjusted for certain permanent book to tax differences~~expense (benefit) of $42 thousand and ~~tax credits.~~

The income tax provision for the nine months ended December 31, 2017 was determined by applying an estimated effective tax rate of 0.2% to loss before income tax. The estimated effective tax rate for the nine month period ended December 31, 2016 was (0.4)%. The estimated effective income tax rate was determined by applying statutory tax rates to pretax loss adjusted for certain permanent book to tax differences and tax credits.

Orion is eligible for tax benefits associated with the excess of the tax deduction available for exercises of non-qualified stock options (NQSOs) over the amount recorded at grant. The amount of the benefit is based upon the ultimate deduction reflected in the applicable income tax return.

$(0.8) million, respectively, using this methodology.

As of ~~December~~June 30, 2023 and March 31, ~~2017,~~2023, Orion had federal net operating loss carryforwards of approximately $80.6 million. Orion also had state net operating loss carryforwards of approximately $68.7 million. Orion also had federal tax credit carryforwards of approximately $1.4 million and state tax credits of $0.7 million. Orion's net operating loss and tax credit carryforwards will begin to expire in varying amounts between 2020 and 2038. As of December 31, 2017, Orion had recorded a full valuation allowance ~~of $24.0 million equaling the~~against its net deferred tax asset ~~due to the uncertainty of its realizable value in the future.~~balance. Orion considers future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. In the event that Orion determines that the deferred tax assets are able to be realized, an adjustment to the deferred tax asset would increase income in the period such determination is made.

~~The Tax Cut~~

As of each reporting date, management considers new evidence, both positive and ~~Jobs Act ("Act") was enacted on December 22, 2017. The Act reduces~~negative, that could affect its view of the ~~U.S. federal corporate~~future realization of deferred tax ~~rate from 35% to 21%, requires companies to pay a one-time transition~~assets. Orion considers future taxable income and ongoing prudent and feasible tax ~~on earnings of certain foreign subsidiaries that were previously tax deferred, and creates new taxes on certain foreign sourced earnings. At December 31, 2017, Orion had not completed its accounting~~planning strategies in assessing the need for the ~~tax effects~~valuation allowance. In the event that Orion determines that the more or less of ~~enactment of the Act; however, as described below, Orion has made a reasonable estimate of the effects on its existing deferred tax balances and the one-time transition tax.~~

~~Orion remeasured~~ its deferred tax assets ~~based on the rates at which they~~ are ~~expected~~able to reverse in the future, which is generally the 21% federal corporate tax rate. The provisional amount recorded related to the remeasurement of its deferred tax balance decreased deferred tax assets by $11.3 million. This decrease to deferred tax assets was fully offset by a corresponding decreasebe realized, an adjustment to the valuation ~~allowance. There is no impact on~~allowance would be reflected in the ~~current year~~company’s provision for income ~~tax expense for the federal corporate tax rate change due to Orion's current year taxable loss.~~

~~The Act also requires companies to pay a one-time transition tax on Orion's total post-1986 earnings and profits ("E&P") of its foreign subsidiary that were previously tax deferred from US income~~ taxes. ~~Since Orion's foreign subsidiary has negative E&P, there is no transition tax to be reported in its income tax expense.~~

Uncertain Tax Positions

As of ~~December 31, 2017, the~~June 30, 2023, Orion’s balance of gross unrecognized tax benefits was approximately ~~$0.1~~$0.2 million, all of which would reduce Orion’s effective tax rate if recognized.

Orion has classified the amounts recorded for uncertain tax benefits in the balance sheet as ~~other~~Other long-term liabilities ~~(non-current)~~ to the extent that payment is not anticipated within one year. Orion recognizes penalties and interest related to uncertain tax liabilities in income tax (benefit) expense. Penalties and interest ~~are immaterial and~~ are included in the unrecognized tax benefits.

NOTE 1314 — COMMITMENTS AND CONTINGENCIES

~~Operating Leases~~

Orion leases office space and equipment under operating leases expiring at various dates through 2020. Rent expense under operating leases was $0.2 million and $0.3 million for the three months ended December 31, 2017 and 2016, respectively, and $0.7 million and $0.6 million for the nine months ended December 31, 2017 and 2016, respectively.

~~On April 28, 2017, Orion renewed the lease for its Jacksonville, Florida office space for an additional three-year term with annual rent expense of approximately $0.1 million.~~

On March 31, 2016, Orion entered into a purchase and sale agreement with a third party to sell and leaseback Orion's manufacturing and distribution facility for gross cash proceeds of $2.6 million. The transaction closed on June 30, 2016.

Litigation

Orion is subject to various claims and legal proceedings arising in the ordinary course of business. ~~As of the date of this report,~~ Orion ~~is unable to currently assess whether~~does not believe the final resolution of any of such claims or legal proceedings ~~may~~will have a material adverse effect on ~~our~~Orion’s future results of ~~operations. In addition to ordinary-course litigation, Orion is a party to the proceedings described below.~~

On March 27, 2014, Orion was named as a defendant in a civil lawsuit filed by Neal R. Verfuerth, a former chief executive officer who was terminated for cause in November 2012, in the United States District Court for the Eastern District of Wisconsin (Green Bay Division). The plaintiff alleged, among other things, that Orion breached certain agreements entered into with the plaintiff, including the plaintiff’s employment agreement, and violated certain laws. The complaint sought, among other relief, unspecified pecuniary and compensatory damages, fees and such other relief as the court may deem just and proper. On November 4, 2014, the court granted Orion's motion to dismiss six of the plaintiff's claims. On January 9, 2015, the plaintiff filed an amended complaint re-alleging claims that were dismissed by the court, including, among other things, a retaliation claim and certain claims with respect to prior management agreements and certain intellectual property rights. On January 22, 2015, Orion filed a motion to dismiss and a motion to strike certain of the claims made in the amended complaint. On May 18, 2015, the court dismissed the intellectual property claims re-alleged in the January 9, 2015 amended complaint. At the court's direction, the parties attempted to mediate the matter in May 2016, but were unsuccessful in resolving the matter.

On August 25, 2016, the Chief Judge of the United States District Court for the Eastern District of Wisconsin (Green Bay Division) dismissed all claims against Orion brought by the plaintiff, including his claims that Orion had allegedly breached the plaintiff’s employment agreement and had allegedly violated the plaintiff's whistleblower rights. On September 22, 2016, the plaintiff filed an appeal to the United States Court of Appeals challenging the judgment rendered on August 25, 2016. After the court-mandated mediation was unsuccessful, the plaintiff moved forward with his appeal focusing only on the District Court's dismissal of his whistleblower claims. The oral arguments for the appeal were held on September 27, 2017.

On January 11, 2018, a three judge panel of the United States Court of Appeals Seventh Circuit unanimously affirmed the dismissal of all of the plaintiff’s claims against Orion. It is currently uncertain whether the plaintiff intends to appeal the decision.

If the plaintiff chooses to appeal the decision, Orion intends to continue to defend against the claims vigorously. Orion believes it has substantial legal and factual defenses to the claims and allegations remaining in the case and that Orion will prevail in any further proceedings. Based upon the current status of the lawsuit, Orion does not believe that it is reasonably possible that the lawsuit will have a material adverse impact on its future continuing results of operations.

On November 10, 2017, a purported Orion shareholder, Stephen Narten, filed a civil lawsuit in the Circuit Court for Manitowoc County against those individuals who served on Orion’s Board of Directors during fiscal years 2015, 2016, and 2017 and certain current and former officers during the same period. The plaintiff, who purports to bring the suit derivatively on behalf of Orion, alleges that the director defendants breached their fiduciary duties in connection with granting certain stock-based incentive awards under Orion’s 2004 Stock and Incentive Awards Plan and that the directors and current and former officers breached their fiduciary duties by accepting those awards. On January 22, 2018, Orion moved to dismiss the lawsuit on the grounds that the complaint fails to state a claim upon which relief may be granted. Orion intends to defend against the claims vigorously. Orion believes that

it has substantial defenses to the claims in this proceeding. Based upon the current status of the lawsuit, Orion does not believe that it is reasonably possible that the lawsuit will have a material adverse impact on its future continuing results of operations.

operations or financial condition.

State Tax Assessment

In June 2016, Orion negotiated a settlement with the Wisconsin Department of Revenue with respect to an assessment regarding the proper classification of its products for tax purposes under Wisconsin law for $0.5 million.

During ~~the nine months ended December 31, 2017,~~fiscal year 2018, Orion was notified of a pending sales and use tax audit by the Wisconsin Department of Revenue for the period covering April 1, 2013 through March 31, 2017. ~~Although the final resolution of the Company’s~~This sales and use tax audit ~~is uncertain, based on current information, in~~was settled during the opinion of the Company’s management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s condensed consolidated balance sheet, statements of operations, or liquidity.quarter ended June 30, 2022 with no tax adjustment.

NOTE 1415 — SHAREHOLDERS’ EQUITY

Employee Stock Purchase Plan

In August 2010, Orion’s ~~board~~Board of ~~directors~~Directors approved a non-compensatory employee stock purchase plan, or ~~ESPP.~~“ESPP”. In the three months ended June 30, 2023, Orion issued 700 shares under the ~~following shares from treasury during~~ESPP plan at a closing market price of $1.63. In the ~~nine~~three months ended ~~December 31, 2017:~~

Shares Issued Under ESPP
Plan Closing Market
Price
Quarter Ended June 30, 2017 2,150
$1.28
Quarter Ended September 30, 2017 2,681
$1.12
Quarter Ended December 31, 2017 3,446
$0.88
Total issued in fiscal 2018 8,277
$0.88 - 1.28

~~In prior years,~~June 30, 2022, Orion issued ~~loans~~443 shares under the ESPP plan at a closing market price of $2.01.

Sale of shares

In March 2023, Orion filed a universal shelf registration statement with the Securities and Exchange Commission. Under the shelf registration statement, Orion currently has the flexibility to ~~non-executive employees~~publicly offer and sell from time to ~~purchase shares~~ time up to $100 million

of ~~its stock.~~debt and/or equity securities. The ~~loan program has been discontinued and new loans are no longer issued. As~~filing of the shelf registration statement may help facilitate Orion’s ability to raise public equity or debt capital to expand existing businesses, fund potential acquisitions, invest in other growth opportunities, repay existing debt, or for other general corporate purposes.

In March ~~31, 2017, four thousand dollars of such loans remained outstanding and were reflected on Orion’s balance sheet as a contra-equity account. During the nine months ended December 31, 2017,~~2021, Orion entered into ~~agreements with~~an At Market Issuance Sales Agreement to undertake an “at the ~~counterparties~~market” (ATM) public equity capital raising program pursuant to ~~these loans. In exchange for~~which Orion may offer and sell shares of common stock from time to time, having an aggregate offering price of up to $50 million. No share sales have been effected pursuant to the forgiveness of their outstanding loan balance, the employees returned their shares to Orion. As a result of these transactions, 1,230 shares were recorded within treasury stock and the loan balances were eliminated.ATM program through June 30, 2023.

NOTE 1516 — STOCK OPTIONS AND RESTRICTED SHARES

At ~~Orion's 2016 Annual Meeting~~Orion’s 2019 annual meeting of ~~Shareholders~~shareholders held on August ~~3, 2016, Orion's~~7, 2019, Orion’s shareholders approved the Orion Energy Systems, Inc. 2016 Omnibus Incentive Plan, as amended and restated (the ~~"Plan"~~“Amended 2016 Plan”). The Amended 2016 Plan increased the number of shares of Orion’s common stock available for issuance under the Amended 2016 Plan from 1,750,000 shares to 3,500,000 shares (an increase of 1,750,000 shares); added a minimum vesting period for all awards granted under the Amended 2016 Plan (with limited exceptions); and added a specific prohibition on the payment of dividends and dividend equivalents on unvested awards.

The Amended 2016 Plan authorizes grants of equity-based and incentive cash awards to eligible participants designated by the Plan's administrator. Awards under the Amended 2016 Plan may consist of stock options, stock appreciation rights, performance shares, performance units, common stock, restricted stock, restricted stock units, incentive awards or dividend equivalent units.

Prior to ~~shareholder approval of~~ the 2016 Omnibus Incentive Plan, ~~the Company~~Orion maintained its 2004 Stock and Incentive Awards Plan, as amended, which authorized the grant of cash and equity awards to employees (the ~~“Former~~“2004 Plan”). No new awards are being granted under the ~~Former~~2004 Plan; however, all awards granted under the ~~Former~~2004 Plan that ~~were~~are outstanding ~~as of August 3, 2016~~ will continue to be governed by the ~~Former~~2004 Plan.

~~Certain non-employee directors have elected to receive stock~~ Forfeited awards ~~in lieu of cash compensation pursuant to elections made~~originally issued under ~~Orion’s non-employee director compensation program.~~the 2004 Plan are canceled and are not available for subsequent issuance under the 2004 Plan or under the Amended 2016 Plan. The ~~plans~~Amended 2016 Plan and the 2004 Plan also permit accelerated vesting in the event of certain changes of control of Orion as well as under other special circumstances.

Certain non-employee directors have from time to time elected to receive stock awards in lieu of cash compensation pursuant to elections made under Orion’s non-employee director compensation program.

The following amounts of stock-based compensation were recorded (dollars in thousands):


	For the Three Months Ended June 30,
	2023		2022
Cost of product revenue	$	1	$	1
General and administrative		182		250
Sales and marketing		4		2
Research and development		1		1
Total	$	188	$	254

Three Months Ended December 31, Nine Months Ended December 31,
2017 2016 2017 2016
Cost of product revenue $ 1
$ 7
$ 11
$ 30
General and administrative 205
283
722
1,035
Sales and marketing 34
64
113
116
Research and development 10
30
22
71
Total $ 250
$ 384
$ 868
$ 1,252

During the ~~first nine~~three months ~~of fiscal 2018,~~ended June 30, 2023, Orion had the following activity related to its stock-based ~~compensation:~~compensation. Restricted shares includes both performance-vesting restricted stock and time vesting-restricted stock.


	Restricted Shares			Stock Options
Awards outstanding at March 31, 2023		743,454			73,136
Awards granted		50,753			—
Awards vested or exercised		(206,451	)		—
Awards forfeited		(5,250	)		(73,136	)
Awards outstanding at June 30, 2023		582,506			—
Per share weighted average price on grant date	$	1.66			—

Restricted Shares Stock Options
Balance at March 31, 2017 1,704,543
1,520,953
Awards granted 730,410
—
Awards vested (592,851 ) —
Awards forfeited (296,893 ) (811,286 )
Awards outstanding at December 31, 2017 1,545,209
709,667
Per share price on grant date $0.88 - $1.95
—

As of ~~December 31, 2017,~~June 30, 2023, the amount of deferred stock-based compensation expense to be recognized, over a remaining period of 2.0 years, was approximately ~~$1.6~~$1.1 million.

NOTE 1617 — SEGMENTS

Reportable segments are components of an entity that have separate financial data that the entity's chief operating decision maker ("CODM") regularly reviews when allocating resources and assessing performance. Orion's CODM is the chief executive officer. Previously, Orion ~~has the following business~~had four reportable segments: Orion ~~U.S. Markets~~Services Group Division ("~~USM"~~OSG"), ~~Orion Engineered Services Division ("OES") and~~ Orion Distribution Services Division ("ODS")~~. The accounting policies are the same for each business segment as they are on a consolidated basis.~~

, Orion U.S. Markets Division ~~("USM"~~(“USM”)

~~The USM segment sells commercial lighting systems~~ and ~~energy management systems~~Orion Electric Vehicle Charging Division (“EV Division”). Effective during the first quarter of fiscal 2024, Orion began to evaluate and report the business using three segments: Orion Lighting Division, Orion Maintenance Division and Orion Electric Vehicle Charging Division (“EV Division”). Orion configured its fiscal 2024 plan in order to compare actual performance to plan performance for these segments. Due to the ~~wholesale contractor markets. USM customers include ESCOs and electrical contractors. A significant portion~~change in composition of reportable segments in the ~~historic sales~~first quarter of ~~this division have migrated to distribution channel sales as~~fiscal 2024, the corresponding segment information for fiscal year 2023 has been restated for presentation on a ~~result of the implementation of Orion’s agent distribution strategy.~~ comparable basis.

Lighting Segment

The ~~migrated sales are included in Orion's ODS Division.~~

~~Orion Engineered Systems Division ("OES")~~

~~The OES segment~~Lighting Segment develops and sells lighting products and provides construction and engineering services for Orion's commercial lighting and energy management systems. ~~OES~~The Lighting Segment provides engineering, design, lighting products and in many cases turnkey solutions for large national accounts, governments, municipalities, schools and ~~schools.~~

~~Orion Distribution Services Division ("ODS")~~

~~The ODS segment focuses on selling~~other customers mostly through direct sales and also sells lighting products ~~through~~though manufacturer representative agencies and ~~a network of broadline North American distributors. This segment is expanding as a result of increased sales~~to the wholesale contractor markets through energy service companies and contractors.

Maintenance Segment

The Maintenance Segment provides retailers, distributors ~~as Orion continues~~and other businesses with maintenance, repair and replacement services for the lighting and related electrical components deployed in their facilities.

Electric Vehicle Charging Segment

The Electric Vehicle Charging Segment offers leading electric vehicle charging expertise, sells and installs sourced electric vehicle charging stations with related software subscriptions and renewals and provides EV turnkey installation solutions with ongoing support to ~~develop its agent distribution strategy. This expansion includes the migration of customers from direct sales previously included in the USM division.~~

all commercial verticals.

Corporate and Other

Corporate and Other is comprised of operating expenses not ~~directly~~ allocated to Orion’s segments and adjustments to reconcile to consolidated results (dollars in thousands).


	Revenues				Operating Loss						Total Assets
	For the Three Months Ended June 30,				For the Three Months Ended June 30,
	2023		2022		2023			2022			June 30, 2023		March 31, 2023
Segments:
Lighting Segment	$	12,621	$	13,852	$	(766	)	$	(1,004	)	$	28,025	$	25,009
Maintenance Segment		3,754		4,054		(1,840	)		(290	)		8,250		10,372
Electric Vehicle Charging Segment		1,238		—		(1,934	)		—			9,945		11,501
Corporate and Other		—		—		(1,857	)		(2,323	)		17,926		24,697
	$	17,613	$	17,906	$	(6,397	)	$	(3,617	)	$	64,146	$	71,579

Revenues Operating Income (Loss)
For the Three Months Ended December 31, For the Three Months Ended December 31,
2017 2016 2017 2016
Segments:
Orion U.S. Markets $ 2,168
$ 5,368
$ (520 ) $ 367
Orion Engineered Systems 7,316
8,288
185
(81 )
Orion Distribution Services 7,779
6,961
224
229
Corporate and Other —
—
(1,248 ) (1,543 )
$ 17,263
$ 20,617
$ (1,359 ) $ (1,028 )

Revenues Operating Income (Loss)
For the Nine Months Ended December 31, For the Nine Months Ended December 31,
2017 2016 2017 2016
Segments:
Orion U.S. Markets $ 6,388
$ 16,462
$ (2,970 ) $ 558
Orion Engineered Systems 18,857
22,062
(2,891 ) (878 )
Orion Distribution Services 19,998
16,397
(564 ) (132 )
Corporate and Other —
—
(4,968 ) (4,823 )
$ 45,243
$ 54,921
$ (11,393 ) $ (5,275 )

NOTE 18 — ACQUISITION

Acquisition of Voltrek

Effective on October 5, 2022, Orion acquired all the membership interests of Voltrek, an electric vehicle charging station solutions provider for a purchase price of $5.0 million in cash and $1.0 million of shares of common stock of Orion, subject to normal and customary closing adjustments of $0.9 million (the “Voltrek Acquisition”). In addition, depending upon the relative EBITDA growth of Voltrek’s business in fiscal 2023, 2024 and 2025, Orion could pay up to an additional $3.0 million, $3.5 million and $7.15 million, respectively, in earn-out payments. These compensatory payments do not fall within the scope of ASC 805, Business Combinations, and will be expensed over the course of the earn-out periods to the extent they are earned. As of June 30, 2023, Orion recorded $3.0 million to accrued expenses for the fiscal 2023 earn-out opportunity and an additional $2.1 million to other long-term liabilities for the cumulative potential earn-out opportunity which would be paid in fiscal 2026. The Voltrek Acquisition was funded with cash and Orion shares. Voltrek operates as Voltrek, an Orion Energy Systems business. The Voltrek Acquisition leverages Orion’s project management and maintenance expertise into a rapidly growing sector.

Orion has accounted for the Voltrek Acquisition as a business combination. Orion has allocated the purchase price of approximately $6.9 million to the assets acquired and liabilities assumed at estimated fair values, and the excess of the purchase price over the aggregate fair values is recorded as goodwill. The purchase price and closing adjustments were paid in cash and 620,067 shares of common stock with a total fair market value of $1.0 million, which is recorded in the opening balance sheet at fair value of $0.8 million, the discount on which is due to lock-up requirements on the shares.

The following table summarizes the purchase price allocation for Voltrek:


(in thousands)	Opening Balance Sheet
Cash	$	416
Accounts receivable		1,363
Revenue earned but not billed		325
Inventory		880
Prepaid expenses and other current assets		39
Property and equipment		4
Goodwill		920
Other intangible assets		4,300
Other long-term assets		223
Accounts payable		(1,133	)
Accrued expenses and other		(286	)
Other long-term liabilities		(180	)
Net purchase consideration	$	6,871

Goodwill recorded from the Voltrek Acquisition is attributable to the skillset of the acquired workforce. The goodwill resulting from the Voltrek Acquisition is expected to be deductible for tax purposes. The intangible assets include amounts recognized for the fair value of the trade name, vendor relationship and customer relationships.

The tradename intangible asset was valued using a relief from royalty method. The significant assumptions used include the estimated revenue and royalty rate, among other factors.
The vendor relationship intangible asset was valued using the income approach – excess earnings method. The significant assumptions include estimated revenue, cost of goods sold, and probability of renewal, among other factors.

The customer relationship intangible asset was valued using the income approach – with-and-without method. The significant assumptions include estimated cash flows (including appropriate revenue, cost of revenue and operating expenses attributable to the asset, retention rate, among other factors), and discount rate, reflecting the risks inherent in the future cash flow stream, among other factors.

The categorization of the framework used to measure fair value of the intangible assets is considered to be within the Level 3 valuation hierarchy due to the subjective nature of the unobservable inputs used.

The following table presents the details of the intangible assets acquired at the date of Voltrek Acquisition (dollars in thousands):


	Estimated Fair Value		Estimated Useful Life (Years)
Tradename	$	300		5
Vendor relationship		2,600		7
Customer relationships		1,400		3

Voltrek's post-acquisition results of operations since October 5, 2022 are included in Orion’s Condensed Consolidated Statements of Operations. The operating results of Voltrek are included in the EV segment. See note 17 ~~— REORGANIZATION OF BUSINESS~~

~~During~~– Segments, for results.

Transaction costs related to the ~~nine months ended December 31, 2017, Orion implemented a reorganization and targeted cost savings plan. As a result, Orion entered into separation agreements with 20 employees. During~~Voltrek Acquisition are recorded in acquisition costs in the Condensed Consolidated Statements of Operations. Transaction costs totaled $0.1 million in the three months ended ~~December 31, 2017, Orion recognized approximately nineteen~~June 30, 2023 and $14 thousand in ~~savings due to outplacement services not used. For~~ the ~~nine~~three months ended ~~December 31, 2017,~~June 30, 2022, respectively.

If Voltrek was acquired on April 1, 2022, the pro forma Orion recognized $2.0 million of restructuring expense consisting of severance, outplacement services, and continued medical benefits for terminated employees for a limited post-employment period. The restructuring expenserevenue for the three ~~and nine~~ months ended ~~December 31, 2017 is reflected within Orion’s condensed statement~~June 30, 2022 would have been $19.1 million and proforma net loss would have been $(3.2) million.

The pro forma information was determined based on the historical results of ~~operations as follows (dollars in thousands):~~

Three Months Ended December 31, Nine Months Ended December 31,
2017 2017
Cost of product revenue $ (7 ) $ 33
General and administrative (7 ) 1,808
Sales and marketing (5 ) 178
Total $ (19 ) $ 2,019

~~Total restructuring expense by segment was recorded as follows (dollars in thousands):~~

Three Months Ended December 31, Nine Months Ended December 31,
2017 2017
Orion Distribution Systems $ (5 ) $ 84
Corporate and Other (14 ) 1,935
Total $ (19 ) $ 2,019

Orion ~~recorded no restructuring expense~~and unaudited financial results from Voltrek. These proforma results reflect additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant, and equipment and intangible asset occurred at the ~~Orion U.S. Markets or Orion Engineered Systems segments.~~

~~The following table displays a rollforward~~beginning of the ~~reorganization~~period, along with consequential tax effects. The unaudited pro forma results have been prepared for comparative purposes only and are not necessarily indicative of what would have occurred had the business ~~accruals established for employee separation costs from March 31, 2017 to December 31, 2017 (dollars in thousands):~~

March 31, 2017 Additions Amounts Used December 31, 2017
Employee separation costs $ —
$ 1,876
$ (1,635 ) $ 241
Post-employment medical benefits (1) —
143
(4 ) 139
Total $ —
$ 2,019
$ (1,639 ) $ 380

~~(1)~~

The severance agreement with one executive included a long-term post-employment medical benefit which will be paid over a period of approximately twelve years. Orion recorded a liability for the net present value of this obligation based on the current cost of premiums for this individual’s medical coverage increased by an estimated health care cost trend of 6.8% decreasing to 5% in nine years. This benefit is reflected in Orion’s condensed consolidated balance sheet within accrued expenses and other and other long-term liabilities.

~~The remaining accrual~~combinations been completed at the beginning of ~~$0.4 million for employee separation costs is expected to be paid within~~ the ~~next twelve months.~~

~~During~~period or the fourth quarter of fiscal 2018, Orion identified and implemented further expense reduction initiatives, including not renewing the lease for its Chicago office which was due to expire in May 2018, as well as related workforce reductions and other streamlining initiatives,results that ~~it expects will result in annualized cost savings of approximately $1.5 million. As these are fourth quarter events, restructuring expense related to these actions will be recognized~~may occur in the ~~fourth quarter~~future. Furthermore, the unaudited pro forma financial information does not reflect the impact of ~~fiscal 2018.~~

~~NOTE 18 — SUBSEQUENT EVENTS~~

~~Subsequent events are events or transactions that occur after~~any synergies resulting from the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Management has reviewed events occurring through the date the financial statements were issued and noted no subsequent event requiring accrual or disclosure. See discussion related to litigation matters in Note 13 and new reorganization and cost cutting measures in Note 17 and the MD&A.acquisitions.


~~ITEM 2.~~	~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements and related notes included in this Form 10-Q, as well as our audited ~~consolidated financial statements~~Consolidated Financial Statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2017~~.

2023.

Cautionary Note Regarding Forward-Looking Statements

Any statements in this Quarterly Report on Form 10-Q about our expectations, beliefs, plans, objectives, prospects, financial condition, assumptions or future events or performance are not historical facts and are “forward-looking statements” as that term is defined under the federal securities laws. These statements are often, but not always, made through the use of words or phrases such as “believe”, “anticipate”, “should”, “intend”, “plan”, “will”, “expects”, “estimates”, “projects”, “positioned”, “strategy”, “outlook” and similar words. You should read the statements that contain these types of words carefully. Such forward-looking statements are subject to ~~a number of~~several risks, uncertainties and other factors that could cause actual results to differ materially from what is expressed or implied in such forward-looking statements. There may be events in the future that we are not able to predict accurately or over which we have no control. Potential risks and uncertainties include, but are not limited to, those discussed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2017.~~2023. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or uncertainties after the date hereof or to reflect the occurrence of unanticipated events.

Overview

We ~~are a leading designer and manufacturer~~provide state-of-the-art light emitting diode (“LED”) lighting systems, wireless Internet of high-performance, energy-efficient LED and other lighting platforms. We research, develop, design, manufacture, market, sell and implement energy management systems consisting primarily of high-performance, energy-efficientThings (“IoT”) enabled control solutions, commercial and industrial ~~interior~~electric vehicle (“EV”) charging infrastructure solutions and ~~exterior lighting systems~~maintenance services. We help our customers achieve their sustainability, energy savings and ~~related services. Our~~carbon footprint reduction goals through innovative technology and exceptional service. We sell our products ~~are targeted for applications in three primary~~and services into many vertical markets within the broader commercial and industrial market ~~segments:~~segment. Primary verticals include: big box retail, manufacturing, warehousing/logistics, commercial office, federal and ~~retail, area lighting~~municipal government, healthcare and ~~industrial applications, although we do sell~~schools. Our services consist of turnkey installation and ~~install products into other markets.~~system maintenance. Virtually all of our sales occur within North America.

Our lighting products consist primarily of ~~light emitting diode ("LED")~~LED lighting ~~fixtures.~~fixtures, many of which include IoT enabled control systems. Our principal lighting customers include large national account end-users, federal and state government facilities, large regional account end-users, electrical distributors, electrical contractors and energy service companies ~~("ESCOs"~~(“ESCOs”) ~~and electrical contractors.~~. Currently, ~~substantially all~~most of our lighting products are manufactured at our leased production facility ~~location~~located in Manitowoc, Wisconsin, although as the LED and related IoT market continues to evolve, we are increasingly sourcing products and components from third parties ~~as the LED market continues to evolve and~~ in order to provide versatility in our product development.

We differentiate ourselves from our competitors through offering comprehensive project management services to national account customers to retrofit their multiple locations. Our comprehensive services include initial site surveys and audits, utility incentive and government subsidy management, engineering design, and project management from delivery through to installation and controls integration. In addition, we began to offer lighting and electrical maintenance services in fiscal 2021 which enables us to support a lifetime business relationship with our customer (which we call “Customers for Life”). We completed the Stay-Lite Lighting acquisition on January 1, 2022, which has allowed us to further expand our maintenance services capabilities. We completed the acquisition of Voltrek on October 5, 2022, which has allowed us to further expand our turnkey services capabilities as well as capitalize on the rapidly growing market for EV charging solutions.

We believe the market for LED lighting products ~~has shifted~~and related controls continues to LED lighting systems, and that the customer base for our legacy high intensity fluorescent ("HIF") technology products will continue to decline. Compared to our legacy lighting systems, we believe that LED lighting technology allows for better optical performance, significantly reduced maintenance costs due to performance longevity and reduced energy consumption.grow. Due to their size and flexibility in application, we also believe that LED lighting systems can address opportunities for retrofit applications that cannot be satisfied

by ~~fluorescent or~~ other ~~legacy~~lighting technologies. Our LED lighting technologies have ~~become~~been the primary component of our revenue as we continue to strive to be a leader in the LED market. ~~Although~~

In fiscal 2022, we ~~continue~~continued to ~~sell some~~successfully capitalize on our capability of being a full service, turn-key provider of LED lighting ~~products using~~and controls systems with design, build, installation and project management services, as we continued a very large project for a major national account. As a result of this success, we have evolved our ~~legacy HIF technology, we do not build~~business strategy to ~~stock HIF~~focus on further expanding the nature and scope of our products and ~~instead build~~services offered to ~~committed customer orders as received.~~our customers. This further expansion of our products and services includes pursuing projects to develop recurring revenue streams, including providing lighting and electrical maintenance services and utilizing control sensor technology to collect data and assisting customers in the digitization of this data, along with other potential services. We ~~plan~~also are pursuing the expansion of our IoT, “smart-building” and “connected ceiling” and other related technology, software and controls products and services that we offer to ~~continue~~our customers. While we currently intend to primarily ~~focus on developing~~pursue these expansion strategies organically, we also may explore potential additional business acquisitions, like our acquisition of Stay-Lite Lighting and ~~selling innovative LED products.~~

Voltrek, which have more quickly added these types of expanded and different capabilities to our product and services offerings.

We generally do not have long-term contracts with our customers for product or turnkey services that provide us with recurring ~~revenue from period to period and we~~annual revenue. However, our maintenance services contracts usually consist of multi-year arrangements. We typically generate substantially all of our revenue from sales of lighting and control systems and related services to governmental, commercial and industrial customers on a project-by-project basis. We also perform work under master services or product purchasing agreements with major customers with sales completed on a purchase order basis. In addition, in order to provide quality and timely service under our multi-location master retrofit agreements we are required to make substantial working capital expenditures and advance inventory purchases that we may not be able to recoup if the agreements or a substantial volume of purchase orders under the agreements are delayed or terminated. The loss of, or substantial reduction in sales to, any of our significant customers, or our current single largest customer, or the termination or delay of a significant volume of purchase orders by one or more key customers, could have a material adverse effect on our results of operations in any given future period.

We typically sell our lighting systems in replacement of our customers’ existing fixtures. We call this replacement process a ~~“retrofit.”~~"retrofit". We frequently engage our customer’s existing electrical contractor to provide installation and project management services. We also sell our lighting systems on a wholesale basis, principally to electrical ~~contractors, electrical~~ distributors and ESCOs to sell to their own customer bases.

Our ability to achieve our desired revenue growth and profitability goals depends on our ability to effectively engage distribution and sales agents, develop recurring revenue streams, implement our cost reduction initiatives, and improve our marketing, new product development, project management, margin enhancement and operating expense management, as well as other factors. In addition, the

The gross margins of our products can vary significantly depending upon the types of products we sell, with margins typically ranging from ~~15%~~10% to 50%. As a result, a change in the total mix of our sales ~~toward~~among higher or lower margin products can cause our profitability to fluctuate from period to period.

Our fiscal year ends on March 31. Our current fiscal year ends on March 31, 2024 and is referred to as “fiscal 2024”. We refer to our just completed fiscal year, which ended on March 31, 2023, as "fiscal 2023", and our prior fiscal year which ended on March 31, ~~2017~~2022 as "fiscal ~~2017", and our current fiscal year, which ends on March 31, 2018, as “fiscal 2018.”~~2022". Our fiscal first quarter of each fiscal year ends on June 30,

our fiscal second quarter ends on September 30, our fiscal third quarter ends on December 31 and our fiscal fourth quarter ends on March 31.

Reportable segments are components of an entity that have separate financial data that the entity's chief operating decision maker ("CODM") regularly reviews when allocating resources and assessing performance. Our CODM is our chief executive officer. ~~Orion has three~~Previously, we had four reportable segments: Orion ~~U.S. Markets~~Services Group Division ("~~USM"~~OSG"), ~~Orion Engineered Systems Division ("OES"), and~~ Orion Distribution Services Division ("ODS").

~~Market Shift to Light Emitting Diode Products~~

The rapid market shift in the lighting industry from legacy lighting products to LED lighting products has caused us to adopt new strategies, approaches and processes in order to respond proactively to this industry transition. These changing underlying business fundamentals in this transition include:

~~Rapidly declining LED component costs and LED product end user customer pricing pressure.~~

~~Improving LED product performance and reducing customer return on investment payback periods resulting in increased customer preference for LED lighting products compared to legacy lighting products.~~

~~Increasing LED lighting product customer sales compared to decreasing HIF product sales.~~

~~A broader and more diverse customer base and market opportunities compared to our historical commercial and industrial facility customers.~~

Increased importance of highly innovative product designs and features and enhanced product research and development capabilities requiring rapid new product introduction and new methods of product and company differentiation.

~~Significantly reduced product technology life cycles; significantly shorter product inventory shelf lives and the related increased risk of rapidly occurring product technology obsolescence.~~

~~Increased reliance on international component sources.~~

~~Less internal product fabrication and production capabilities needed to support LED product assembly.~~

~~Different and broader types of components, fabrication and assembly processes needed to support LED product assembly compared to our legacy products.~~

~~Expanding customer bases and sales channels.~~

~~Significantly longer end user product warranty requirements for LED products compared to our legacy products.~~

As we continue to focus our primary business on selling our LED product lines to respond to the rapidly changing market dynamics in the lighting industry, we face intense competition from an increased number of other LED product companies, a number of which have substantially greater resources and more experience and history with LED lighting products than we do.

~~Management Restructuring and Focus on Profitability~~

On May 25, 2017, our Board of Directors restructured our management team. As part of this restructuring, our Chief Executive Officer, John Scribante, left our Company and Mike Altschaefl, our current Board Chair, assumed the role of Chief Executive Officer. In addition, Scott Green, our Executive Vice President, became our new Chief Operating Officer, with ongoing primary responsibility for improving our revenue generation. Mike Potts and Marc Meade, our then current Executive Vice Presidents, remained in their positions and were assigned primary responsibility for substantially reducing our cost structure and for streamlining operations. Bill Hull remained in his position as Chief Financial Officer.

On June 30, 2017, Mike Potts decided to retire as our Chief Risk Officer and Executive Vice President effective as of August 30, 2017. Mr. Potts continues to serve as a member of our Board of Directors and will continue to provide consulting services to us.

Our market and product strategies have not changed. We have renewed our focus on execution, including a reduction in our cost structure. Our restructured management team has developed a plan to achieve breakeven earnings (excluding employee separation costs) before interest, taxes, depreciation, and amortization, or EBITDA, through the implementation of the following cost reduction measures:

~~Constant monitoring and management of manufacturing overhead costs to ensure we continue to deliver strong gross margins amid an increasingly competitive market landscape;~~

~~Reducing staff positions through a targeted reduction in existing headcount;~~

~~Reductions in the total compensation of our executive management and board of directors;~~

~~Reductions in operating expenses, including better control of legal spending, elimination of our racing program and removal of various non-critical back office programs and initiatives.~~

We believe the above cost reduction plan, including the impact of fourth quarter fiscal 2018 actions, will result in annualized cost savings of approximately $6.0 million. These cost reductions, coupled with our renewed focus on sales channel execution, will help to drive revenue growth and accelerate our path to profitability.

During the first nine months of fiscal 2018, we executed on the majority of these plans by entering into separation agreements with 20 employees and recognized $2.0 million of expense for the nine months ended December 31, 2017 in employee separation related costs. During the three months ended December 31, 2017, we recognized approximately nineteen thousand in savings due to outplacement services not used. Our restructuring expense for the three and nine months ended December 31, 2017 is reflected within our condensed consolidated statements of operations as follows (dollars in thousands):

Three Months Ended December 31, Nine Months Ended December 31,
2017 2017
Cost of product revenue $ (7 ) $ 33
General and administrative (7 ) 1,808
Sales and marketing (5 ) 178
Total $ (19 ) $ 2,019

~~Total restructuring expense by segment was recorded as follows (dollars in thousands):~~

Three Months Ended December 31, Nine Months Ended December 31,
2017 2017
Orion Distribution Systems $ (5 ) $ 84
Corporate and Other (14 ) 1,935
Total $ (19 ) $ 2,019

~~We recorded no restructuring expense to the~~, Orion U.S. Markets orDivision (“USM”) and Orion ~~Engineered Systems segments.~~

~~Cash payments for employee separation costs in connection with~~Electric Vehicle Charging Division (“EV Division”). Effective during the reorganization of business plans were $1.5 million for the nine months ended December 31, 2017. The remaining reorganization of business accruals as of December 31, 2017 were $0.5 million, of which $0.4 million relates to employee separation costs that are expected to be paid within one year. The remaining accrual of $0.1 million represents post-retirement medical benefits for one employee which will be paid over several years.

~~During the fourth~~first quarter of fiscal ~~2018,~~2024, we ~~identified~~began to evaluate and ~~implemented further expense reduction initiatives, including not renewing~~report the ~~lease for our Chicago office which was due to expire in May 2018, as well as related workforce reductions~~business using three segments: Orion Lighting Division, Orion Maintenance Division and ~~other streamlining initiatives. We expect these actions will result in annualized cost savings~~Orion Electric Vehicle Charging Division (“EV Division”).

Acquisition

Acquisition of approximately $1.5 million, which is included in the total estimated annual cost savings of $6.0 million discussed above. As these are fourth quarter events, restructuring expense related to these actions will be recognized in the fourth quarter of fiscal 2018.

~~Impairment of Intangible Assets~~

~~During the quarter ended September 30, 2017,~~Voltrek

Effective on October 5, 2022, we reviewed our definite and indefinite lived assets for impairment as a result of our lower than anticipated operating results and recent forecast revisions. As a result of these assessments, we determined that the carrying value of our indefinite lived intangible asset related to the Harris trade name exceeded the asset’s fair value. As a result, we recorded an impairment charge of $0.7 million. No impairment was recorded in the three months ended December 31, 2017. A change in these assumptions or a change in circumstances could result in an impairment charge in a future period.

~~Fiscal 2018 Outlook~~

Despite lower than anticipated results for our three and the nine months ended December 31, 2017, we remain optimistic about our near-term and long-term financial performance. We remain confident in the value, performance, and return on investment of our lighting products. We believe that customer purchases of LED lighting systems will continue to increase in the near-term as expected improvements in LED performance and expected decreases in LED product costs make our LED products even more economically compelling to our customers.

Our near-term optimism is based upon: (i) our efforts to expand our distribution services customer base; (ii) our intentions to continue to selectively expand our sales force; (iii) our investments into new high-performance LED industrial lighting fixtures

(iv) recent and planned new product introductions; and (v) our efforts to improve our gross margin as a result of focused inventory management, our cost containment initiatives and the development of higher-performance LED products.

~~Our long-term optimism is based upon the factors below which we believe will directly or indirectly drive customer spending on LED lighting systems or will improve the profitability of our operations:~~

~~The considerable size~~acquired all of the outstanding membership interests of Voltrek LLC, a leading electric vehicle charging company that provides turnkey installation solutions with ongoing support to all commercial verticals. The initial purchase price consisted of $5.0 million cash and $1.0 million of stock. We also paid an additional $3.0 million based on Voltrek's performance in fiscal 2023 and could pay up to an additional $3.5 million and $7.15 million in compensatory consideration if Voltrek exceeds certain earnings targets in fiscal 2024 and 2025, respectively. The acquisition was funded from existing ~~market opportunity for lighting retrofits, including the market opportunities in commercial office, manufacturing, healthcare, government~~cash and ~~retail markets;~~

~~The continued development~~credit resources and has been operating as Voltrek, a division of ~~our new higher margin products and product enhancements, including our new LED product offerings;~~

~~Our efforts to expand our channels of distribution;~~

~~Our cost reduction initiatives which have included significant changes to our manufacturing operations to increase our flexibility and lower our cost structure;~~

~~LED adoption continues to grow in all sectors;~~

~~Commercial and industrial economic sentiment is strengthening;~~

~~Utility incentives continue to be available and are increasing as a percent of project costs in many areas;~~

~~The passage of tax regulatory reform could encourage capital spending;~~

~~Capital spending is increasing;~~

~~Business profits are increasing; and~~

~~Consumer spending remains strong.~~

Beyond the benefits of our lighting fixtures, we believe that there is also an opportunity to utilize our system platform as a “digital” or “connected ceiling”, or a framework or network that can support the installation and integration of other business solutions on our digital platform. This anticipated growth opportunity is also known as the “Industrial Internet of Things” or IoT, and is still early in its development; however, we have already participated in a few compelling applications that deliver cost savings and efficiency in areas outside of lighting.

Orion Energy Systems.

Results of Operations - Three Months Ended ~~December 31, 2017~~June 30, 2023 versus Three Months Ended ~~December 31, 2016~~

June 30, 2022

The following table sets forth the line items of our ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~operations~~Operations and as a relative percentage of our total revenue for each applicable period, together with the relative percentage change in such line item between applicable comparable periods (dollars in thousands, except percentages):

Three Months Ended December 31,
2017 2016 2017 2016
Amount Amount %
Change % of
Revenue % of
Revenue
Product revenue $ 15,993
$ 19,259
(17.0 )% 92.6 % 93.4 %
Service revenue 1,270
1,358
(6.5 )% 7.4 % 6.6 %
Total revenue 17,263
20,617
(16.3 )% 100.0 % 100.0 %
Cost of product revenue 11,181
13,577
(17.6 )% 64.8 % 65.8 %
Cost of service revenue 966
885
9.2 % 5.6 % 4.3 %
Total cost of revenue 12,147
14,462
(16.0 )% 70.4 % 70.1 %
Gross profit 5,116
6,155
(16.9 )% 29.6 % 29.9 %
General and administrative expenses 2,878
3,541
(18.7 )% 16.7 % 17.2 %
Sales and marketing expenses 2,981
3,147
(5.3 )% 17.3 % 15.3 %
Research and development expenses 616
495
24.4 % 3.5 % 2.4 %
Loss from operations (1,359 ) (1,028 ) (32.2 )% (7.9 )% (5.0 )%
Interest expense (102 ) (65 ) (56.9 )% (0.5 )% (0.3 )%
Interest income 5
7
(28.6 )% — % — %
Loss before income tax (1,456 ) (1,086 ) (34.1 )% (8.4 )% (5.3 )%
Income tax benefit (23 ) —
NM
(0.1 )% — %
Net loss $ (1,433 ) $ (1,086 ) (32.0 )% (8.3 )% (5.3 )%


	Three Months Ended June 30,
	2023			2022						2023			2022
	Amount			Amount			% Change			% of Revenue			% of Revenue
Product revenue	$	13,671		$	13,483			1.4	%		77.6	%		75.3	%
Service revenue		3,942			4,423			(10.9	)%		22.4	%		24.7	%
Total revenue		17,613			17,906			(1.6	)%		100.0	%		100.0	%
Cost of product revenue		10,059			10,385			(3.1	)%		57.1	%		58.0	%
Cost of service revenue		4,383			3,967			10.5	%		24.9	%		22.2	%
Total cost of revenue		14,442			14,352			0.6	%		82.0	%		80.2	%
Gross profit		3,171			3,554			(10.8	)%		18.0	%		19.8	%
General and administrative expenses		5,739			3,754			52.9	%		32.6	%		21.0	%
Acquisition related costs		53			14			278.6	%		0.3	%		0.1	%
Sales and marketing expenses		3,296			2,889			14.1	%		18.7	%		16.1	%
Research and development expenses		480			514			(6.6	)%		2.7	%		2.9	%
Loss from operations		(6,397	)		(3,617	)		76.9	%		(36.3	)%		(20.2	)%
Other income		—			(1	)		(100.0	)%		—			(0.0	)%
Interest expense		(176	)		(17	)		935.3	%		(1.0	)%		(0.1	)%
Amortization of debt issue costs		(24	)		(15	)		60.0	%		(0.1	)%		(0.1	)%
Interest income		2			—		NM				0.0	%		0.0	%
Loss before income tax		(6,595	)		(3,650	)		80.7	%		(37.4	)%		(20.4	)%
Income tax expense (benefit)		42			(815	)	NM				0.2	%		(4.6	)%
Net loss	$	(6,637	)	$	(2,835	)		134.1	%		(37.7	)%		(15.8	)%

*NM - Not Meaningful

~~Revenue.~~ Product revenue decreased 17.0%, or $3.3 million, for the third quarter of fiscal 2018 versus the third quarter of fiscal 2017. The decrease in product revenue was primarily the result of the continued decline in fluorescent product sales, $2.1 million quarter over quarter, and a decrease of $1.0 million in LED lighting revenue. LED lighting revenue decreased by 6.4% from $15.5 million in the third quarter of fiscal 2017 to $14.5 million in the third quarter of fiscal 2018 primarily as a result of the timing of purchases by our direct customers. Service revenue decreased 6.5%, or $0.1 million, due to the timing of completion of installations in the third quarter of fiscal 2018 when compared to the third quarter of fiscal 2017. Total revenue decreased by 16.3%, or $3.4 million, primarily due to the items discussed above.

Revenue, Cost of Revenue and Gross Margin.Product revenue increased 1.4%, or $0.2 million, for the first quarter of fiscal 2024 versus the first quarter of fiscal 2023. Service revenue decreased 10.9%, or $0.5 million, for the first quarter of fiscal 2024 versus the first quarter of fiscal 2023. The resulting decrease in total revenue was due to variability in the timing of larger lighting projects offset by the addition of EV revenue. The decrease in the first quarter revenue was partially offset by revenues due to the acquisition Voltrek. Cost of product revenue decreased ~~17.6%~~by 3.1%, or ~~$2.4~~$0.3 million, in the ~~third~~first quarter of fiscal ~~2018~~2024 versus the comparable period in fiscal ~~2017 primarily due to the decline in sales, partially offset by lower overhead absorption compared to the prior year period.~~2023. Cost of service revenue increased ~~9.2%~~by 10.5%, or ~~$0.1~~$0.4 million, in the ~~third~~first quarter of fiscal ~~2018~~2024 versus the comparable period in fiscal ~~2017 primarily due to costs incurred on a large installation project and the timing of project completions.~~2023. Gross margin ~~declined slightly~~decreased from ~~29.9%~~19.8% of revenue in the ~~third~~first quarter of fiscal ~~2017~~2023 to ~~29.6%~~18.0% in the ~~third~~first quarter of fiscal ~~2018,~~2024, due primarily ~~reflecting lower overhead~~to reduced sales decreasing the absorption ~~on lower revenue in the recent period.~~

of fixed costs.

Operating Expenses

General and Administrative.General and administrative expenses ~~decreased 18.7%~~increased 52.9%, or ~~$0.7~~$2.0 million, in the ~~third~~first quarter of fiscal ~~2018~~2024 compared to the ~~third~~first quarter of fiscal ~~2017, primarily due to a decrease in wages as a result of headcount and salary reductions, legal expense, depreciation and amortization expense, and stock compensation expense.~~

~~Sales and Marketing.~~ Sales and marketing expenses decreased 5.3%, or $0.2 million, in the third quarter of fiscal 2018 compared to the third quarter of fiscal 2017. The decrease quarter over quarter was primarily due to reduced consulting and professional fees related to special events and field sales, partially offset by increased expenses focusing on additional sales activities.

~~Research and Development.~~ Research and development expenses increased by 24.4%, or $0.1 million, in the third quarter of fiscal 2018 compared to the third quarter of fiscal 2017 primarily due to increased testing and consulting costs.

~~Interest Expense.~~ ~~Interest expense in the third quarter of fiscal 2018 increased by 56.9%, or thirty-seven thousand dollars, from the third quarter of fiscal 2017. The~~2023. This comparative increase ~~in interest expense was due to increased third party financing costs.~~

~~Interest Income.~~ Interest income in the third quarter of fiscal 2018 decreased by 28.6%, or two thousand dollars, from the third quarter of fiscal 2017. Our interest income decreased as a result of the continued run-off of legacy customer financed projects.

~~Income Taxes.~~ Income tax benefit of twenty-three thousand in the third quarter of fiscal 2018 primarily reflected federal tax refunds, offset by state tax liabilities. We recorded no income tax expense in the third quarter of fiscal 2017 as a result of our operating losses. Our normal income tax expense is due primarily to minimum state tax liabilities.

~~Orion U.S. Markets Division~~

The USM segment sells commercial lighting systems and energy management systems to the wholesale contractor markets. USM customers include ESCOs and electrical contractors. A significant portion of the historic sales of this division have migrated to distribution channel sales as a result of the implementation of our agent distribution strategy. The migrated sales are included in our ODS segment.

~~The following table summarizes our USM segment operating results (dollars in thousands):~~

For the Three Months Ended December 31,
2017 2016 %
Change
Revenues $ 2,168
$ 5,368
(59.6 )%
Operating (loss) income $ (520 ) $ 367
NM
Operating margin (24.0 )% 6.8 %

USM segment revenue decreased from the third quarter of fiscal 2017 by 59.6%, or $3.2 million. The decrease in revenue during the third quarter of fiscal 2018 compared to the third quarter of fiscal 2017 was due to a $1.4 million decline in sales to select large direct customers. The remainder of the decline was due primarily to the migration of sales to our ODS segment.

The USM segment realized an operating loss in the third quarter of fiscal 2018 of $0.5 million as compared to operating income of $0.4 million during the third quarter of fiscal 2017. The decline in the segment’s operating results was primarily due to the ~~significant decline~~acquisition of Voltrek and a $1.1 million accrual of the expected Voltrek earn-out payment.

Acquisition Related Costs. Acquisition related costs were relatively flat, in ~~sales period over period, including~~ the ~~migration~~first quarter of ~~sales~~fiscal 2024 compared to ~~ODS, resulting~~the first quarter of fiscal 2023.

Sales and Marketing. Sales and marketing expenses increased 14.1%, or $0.4 million, in ~~lost operating expense leverage.~~

~~Orion Engineered Systems~~the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023. This comparative increase was primarily due to the acquisition of Voltrek.

Research and Development. Research and development expenses were relatively flat, in the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023.

Lighting Division

~~The OES segment~~

Our lighting division develops and sells lighting products and provides construction and engineering services for our commercial lighting and energy management systems. ~~OES~~Our lighting division provides engineering, design, lighting products and in many cases turnkey solutions for large national accounts, governments, municipalities, schools and ~~schools.~~

other customers mostly through direct sales and also sells lighting products though manufacturer representative agencies and to the wholesale contractor markets through ESCOs and contractors.

The following table summarizes our ~~OES segment~~lighting division operating results (dollars in thousands):

For the Three Months Ended December 31,
2017 2016 %
Change
Revenues $ 7,316
$ 8,288
(11.7 )%
Operating income (loss) $ 185
$ (81 ) NM
Operating margin 2.5 % (1.0 )%

~~OES~~


	Three Months Ended June 30,
	2023			2022			% Change
Revenues	$	12,621		$	13,852			(8.9	)%
Operating loss	$	(766	)	$	(1,004	)		23.7	%
Operating margin		(6.1	)%		(7.2	)%

Lighting division revenue ~~decreased~~ in the ~~third~~first quarter of fiscal ~~2018~~2024 decreased by ~~11.7%~~8.9%, or ~~$1.0~~$1.2 million compared to the ~~third~~first quarter of fiscal ~~2017 primarily as~~2023. The decrease in lighting division revenue was due to variability in the timing of larger lighting projects. The decrease in corresponding operating loss in this segment is a result of improved gross margin.

Maintenance Division

Our maintenance division provides retailers, distributors and other businesses with maintenance, repair and replacement services for the ~~timing of delivery of our turnkey projects~~lighting and ~~reduced fluorescent purchases by a large retail customer.~~

~~OES segment operating income~~related electrical components deployed in the third quarter of fiscal 2018 was $0.2 million, an increase of $0.3 million from the $0.1 million loss in the third quarter of fiscal 2017. The segment’s operating income was the result of improved delivery costs in the current quarter over the same period last year.

~~Orion Distribution Services Division~~

The ODS segment focuses on selling lighting products through manufacturer representative agencies and a network of broadline North American distributors. This segment is expanding as a result of increased sales through distributors as we continue to develop our agent distribution strategy. This expansion includes the migration of customers from direct sales previously included in the USM segment.

their facilities.

The following table summarizes our ~~ODS segment~~maintenance division operating results (dollars in thousands):

For the Three Months Ended December 31,
2017 2016 %
Change
Revenues $ 7,779
$ 6,961
11.8 %
Operating income 224
229
(2.2 )%
Operating margin 2.9 % 3.3 %

~~ODS segment~~


	Three Months Ended June 30,
	2023			2022			% Change
Revenues	$	3,754		$	4,054			(7.4	)%
Operating loss	$	(1,840	)	$	(290	)		(534.5	)%
Operating margin		(49.0	)%		(7.2	)%

Maintenance division revenue ~~increased~~ in the ~~third~~first quarter of fiscal ~~2018~~2024 decreased by ~~11.8%~~7.4%, or ~~$0.8~~$0.3 million, compared to the ~~third~~first quarter of fiscal ~~2017,~~2023, primarily due to ~~an increase~~a decrease in ~~select distributor sales.~~

~~While~~sales to one customer. Operating loss in this segment increased as a result of a decrease in gross margins driven by higher subcontractor costs.

Electric Vehicle Charging Division

Our EV division offers leading electric vehicle charging expertise and provides EV turnkey installation solutions with ongoing support to all commercial verticals.

The following table summarizes our EV segment operations results (dollars in thousands):


	Three Months Ended June 30,
	2023			2022			% Change
Revenues	$	1,238		$	—		NM
Operating loss	$	(1,934	)	$	—		NM
Operating margin		(156.2	)%		—	%

* NM - Not Meaningful

EV segment revenue ~~increased period over period,~~generated by Voltrek in the ~~ODS segment’s operating results remained relatively flat as compared to the third~~first quarter of fiscal ~~2017 due to an increase~~2024 was $1.2 million. Operating loss in ~~selling expenses.~~

~~Results of Operations - Nine Months Ended December 31, 2017 versus Nine Months Ended December 31, 2016~~

The following table sets forth the line items of our condensed consolidated statements of operations and as a relative percentage of our total revenue for each applicable period, together with the relative percentage change in such line item between applicable comparable periods (in thousands, except percentages):

Nine Months Ended December 31,
2017 2016 2017 2016
Amount Amount %
Change % of
Revenue % of
Revenue
Product revenue $ 41,883
$ 52,286
(19.9 )% 92.6 % 95.2 %
Service revenue 3,360
2,635
27.5 % 7.4 % 4.8 %
Total revenue 45,243
54,921
(17.6 )% 100.0 % 100.0 %
Cost of product revenue 30,587
36,748
(16.8 )% 67.6 % 66.9 %
Cost of service revenue 3,209
1,748
83.6 % 7.1 % 3.2 %
Total cost of revenue 33,796
38,496
(12.2 )% 74.7 % 70.1 %
Gross profit 11,447
16,425
(30.3 )% 25.3 % 29.9 %
General and administrative expenses 11,370
11,040
3.0 % 25.1 % 20.1 %
Impairment of intangible assets 710
—
NM
1.6 % — %
Sales and marketing expenses 9,241
9,167
0.8 % 20.4 % 16.7 %
Research and development expenses 1,519
1,493
1.7 % 3.4 % 2.7 %
Loss from operations (11,393 ) (5,275 ) (116.0 )% (25.2 )% (9.6 )%
Other income —
190
NM
— % 0.3 %
Interest expense (308 ) (203 ) (51.7 )% (0.7 )% (0.4 )%
Interest income 12
31
(61.3 )% — % 0.1 %
Loss before income tax (11,689 ) (5,257 ) (122.4 )% (25.9 )% (9.6 )%
Income tax (benefit) expense (23 ) (261 ) NM
(0.1 )% (0.5 )%
Net loss $ (11,666 ) $ (4,996 ) (133.5 )% (25.8 )% (9.1 )%

*NM - Not Meaningful

~~Revenue.~~ ~~Product revenue decreased 19.9%, or $10.4 million, for the first nine months of fiscal 2018 versus the first nine months of fiscal 2017. The decrease in product revenue~~this segment was primarily a result of ~~the continued decline~~$1.1 million of earn-out expense included in fluorescent product sales, $6.4 million year over year, and a decrease of $3.6 million in LED lighting revenue. LED lighting revenue decreased 8.7% from $41.2 million in the first nine months of fiscal 2017 to $37.6 million in the first nine months of fiscal 2018 primarily as a result of the timing of purchases by our direct customers. Service revenue increased 27.5%, or $0.7 million, primarily due to the timing of installation projects in the first nine months of fiscal 2018 when compared to the first nine months of fiscal 2017. Total revenue decreased by 17.6%, or $9.7 million, primarily due to the items discussed above.

~~Cost of Revenue and Gross Margin.~~ Cost of product revenue decreased 16.8%, or $6.2 million, in the first nine months of fiscal 2018 versus the comparable period in fiscal 2017 primarily due to the decline in sales and the resulting lower overhead absorption compared to the prior year period. Cost of service revenue increased 83.6%, or $1.5 million, in the first nine months of fiscal 2018 versus the comparable period in fiscal 2017 primarily due to the timing of completion and costs on large projects. Gross margin decreased from 29.9% of revenue in the first nine months of fiscal 2017 to 25.3% in the first nine months of fiscal 2018. Our product gross margin decreased as a result of under-absorption within our manufacturing facility and an increase in sales of products sourced from third party manufacturers.

~~Operating Expenses~~

~~General and Administrative.~~ General and administrative expenses increased 3.0%, or $0.3 million, in the first nine months of fiscal 2018 compared to the first nine months of 2017, primarily due to $1.8 million in reorganization costs, offset by decreases in wages due to salary and headcount reductions, legal, depreciation and amortization and stock compensation expenses. Excluding the employee separation costs, general and administrative ~~expenses decreased $1.7 million, or 15.1%.~~

~~Impairment of Intangible Assets.~~ During the nine months ended December 31, 2017, we performed a review of our definite and indefinite-lived tangible and intangible assets for impairment. In conjunction with this review, we determined that the carrying value of our Harris trade name intangible asset exceeded its fair value. As a result, we recorded an impairment charge of $0.7 million during the three months ended September 30, 2017.

~~Sales and Marketing.~~ Our sales and marketing expenses increased 0.8%, or $0.1 million, in the first nine months of fiscal 2018 compared to the first nine months of fiscal 2017. The increase was primarily due to employee separation costs of $0.2 million and increased commissions related to our agency channel, offset by reduced consulting and professional fees related to special events and field sales, partially offset by increased expenses focusing on additional sales activities.

~~Research and Development.~~ Research and development expenses increased by 1.7%, or twenty-six thousand dollars in the first nine months of fiscal 2018 compared to the first nine months of fiscal 2017 primarily due to an increase in wages, offset by decreased testing and supply costs.

~~Other income.~~ ~~Other income in the first nine months of fiscal 2017 represented product royalties received from licensing agreements for our patents.~~

~~Interest Expense.~~ Interest expense in the first nine months of fiscal 2018 increased by 51.7%, or $0.1 million, from the first nine months of fiscal 2017. The increase in interest expense was due to increased third party financing costs.

~~Interest Income.~~ Interest income in the first nine months of fiscal 2018 decreased by 61.3%, or nineteen thousand dollars, from the first nine months of fiscal 2017. Our interest income decreased as a result of the continued run-off legacy customer financed projects.

~~Income Taxes.~~ Income tax benefit in the first nine months of 2018 decreased $0.2 million from the first nine months of fiscal 2017 primarily due to the release of a valuation reserve in fiscal 2017. Our income tax expense is due primarily to minimum state tax liabilities.

~~Orion U.S. Markets Division~~

~~The following table summarizes our USM segment operating results (dollars in thousands):~~

For the Nine Months Ended December 31,
2017 2016 %
Change
Revenues $ 6,388
$ 16,462
(61.2 )%
Operating (loss) income $ (2,970 ) $ 558
NM
Operating margin (46.5 )% 3.4 %

USM segment revenue decreased from the first nine months of fiscal 2017 by 61.2%, or $10.1 million. The decrease in revenue during the first nine months of fiscal 2018 compared to the first nine months of fiscal 2017 included the continued transition to our distribution sales model through the migration of sales to our ODS segment. Previously direct sales that are now sold through independent manufacturer representative agents are reflected within our ODS segment. The decrease also reflects a $2.4 million decline in sales to select large direct customers.

The USM segment’s operating results decreased $3.5 million in the first nine months of fiscal 2018 as compared to the first nine months of fiscal 2017. The segment's operating loss was the result of the significant decline in sales due to the migration of customers to the distribution sales channel resulting in lost operating expense leverage and an intangible asset impairment in the second quarter of fiscal 2018 of $0.2 million.

~~Orion Engineered Systems Division~~

The OES segment develops and sells lighting products and provides construction and engineering services for Orion's commercial lighting and energy management systems. OES provides turnkey solutions for large national accounts, governments, municipalities and schools.

~~The following table summarizes our OES segment operating results (dollars in thousands):~~

For the Nine Months Ended December 31,
2017 2016 %
Change
Revenues $ 18,857
$ 22,062
(14.5 )%
Operating income (loss) $ (2,891 ) $ (878 ) (229.3 )%
Operating margin (15.3 )% (4.0 )%

OES revenue decreased in the nine months of fiscal 2018 by 14.5%, or $3.2 million, compared to the first nine months of fiscal 2017 primarily as a result of the timing of delivery of our turnkey projects and reduced florescent purchases by a large retail customer.

OES segment operating loss in the first nine months of fiscal 2018 increased by $2.0 million from the first nine months of fiscal 2017. The segment's operating loss was the result of the decline in sales resulting in lost operating leverage and an intangible asset impairment in the second quarter of fiscal 2018 of $0.5 million .

~~Orion Distribution Services Division~~

The ODS segment focuses on selling lighting products through manufacturer representative agencies and a network of broadline North American distributors. This segment is expanding as a result of increased sales through distributors as Orion continues to develop its agent distribution strategy. This expansion includes the migration of customers from direct sales previously included in the USM segment.

~~The following table summarizes our ODS segment operating results (dollars in thousands):~~

For the Nine Months Ended December 31,
2017 2016 %
Change
Revenues $ 19,998
$ 16,397
22.0 %
Operating loss (564 ) (132 ) NM
Operating margin (2.8 )% (0.8 )%

ODS segment revenue increased in the first nine months of fiscal 2018 from the first nine months of fiscal 2017 by $3.6 million. The increase in revenue was primarily due to our transition to a distribution channel sales model migrating direct sales through our manufacturer representative agents. In addition, ODS revenue grew as a result of our expanding manufacturer representative agencies and the continued ramp of sales through these agencies. The total manufacturer representative agencies increased from 31 to approximately 50 agencies from the third quarter of fiscal 2017 to the third quarter of fiscal 2018.

~~ODS segment operating loss increased by $0.4 million in the first nine months of fiscal 2018 compared to the first nine months of fiscal 2017, primarily due to an increase in selling expenses.~~

Liquidity and Capital Resources

Overview

We believe our existing cash and operating cash flow provide us with the financial flexibility needed to meet our capital requirements, including to fund targeted our budgeted capital expenditures and working capital needs for at least one year from the date of this report, as well as our longer-term capital requirements for periods beyond at least one year from the date of this report.

We had approximately ~~$10.6~~$8.2 million in cash and cash equivalents as of ~~December 31, 2017,~~June 30, 2023, compared to ~~$17.3~~$16.0 million at March 31, ~~2017.~~2023. Our cash position decreased ~~primarily~~ as a result of ~~our net~~an operating loss ~~separation payments to terminated employees in conjunction with our management reorganization~~ and ~~cost reduction initiatives, and~~an overall use of working capital during the ~~net repayment~~first quarter of ~~$3.0 million on our revolving credit facility.~~

fiscal 2024.

Our future liquidity needs and forecasted cash flows are dependent upon many factors, including our relative revenue, gross margins, cash management practices, cost ~~reduction initiatives,~~containment, working capital management and capital ~~expenditures, pending or future litigation results~~expenditures. While we believe that we will likely have adequate available cash and ~~cost containment measures. In addition, we tend~~equivalents and credit availability under our Credit Agreement to ~~experience high~~satisfy our currently anticipated working capital ~~costs when we increase sales from existing levels. Based~~and liquidity requirements for at least the next 12 months based on our current ~~expectations, while~~cash flow forecast, if we ~~anticipate realizing improved operating results in the future, we also currently believe that~~experience significant liquidity constraints, we may ~~experience negative working capital cash flows during some interim periods.~~

be required to issue equity or debt securities, reduce our sales efforts, implement additional cost savings initiatives or undertake other efforts to conserve our cash.

Cash Flows

The following table summarizes our cash flows for the ~~nine~~three months ended ~~December 31, 2017~~June 30, 2023 and ~~2016~~2022 (in thousands):

Nine Months Ended December 31,
2017 2016
Operating activities $ (3,081 ) $ 266
Investing activities (521 ) 1,972
Financing activities (3,142 ) 1,338
Increase (decrease) in cash and cash equivalents $ (6,744 ) $ 3,576


	Three Months Ended June 30,
	2023			2022
Operating activities	$	(7,327	)	$	(5,005	)
Investing activities		(413	)		(85	)
Financing activities		(3	)		48
Decrease in cash and cash equivalents	$	(7,743	)	$	(5,042	)

Cash Flows Related to Operating Activities. Cash ~~provided by or~~ used in operating activities primarily ~~consisted~~consists of a net loss adjusted for certain non-cash items, including depreciation, ~~and~~ amortization of intangible assets, stock-based compensation, ~~expenses,~~amortization of debt issue costs, provisions for reserves, and the effect of changes in working capital and other activities.

Cash used in operating activities for the first ~~nine months~~quarter of fiscal ~~2018~~2024 was ~~$3.1~~$7.3 million and consisted of aour net loss of $6.6 million adjusted for non-cash expense items ~~of $7.8 million~~ and net cash ~~provided by~~used in changes in operating assets ~~and liabilities of $4.7 million.~~ ~~Cash used by changes in operating assets and liabilities consisted of a decrease~~ of $0.8 million, ~~in accrued expenses and other primarily due to~~ the ~~timing~~largest of ~~payment of commissions and lower accrued bonuses in the current fiscal year,~~which was a ~~decrease of $0.3~~$1.9 million in deferred revenue due to the timing of project completion and a decrease of $0.2 million in deferred contract costs due to the timing of project completions. Cash provided by changes in operating assets and liabilities included a decrease of $0.5 million in accounts receivable due to the decline in sales and the timing of customer collections, a decrease in inventory of $4.1 million as a result of increased focus on inventory management in consideration of the lower sales volume, a decrease of $1.4 million in prepaid and other assets primarily due to the timing of project billings, and a negligible decrease in accounts payable.

Cash ~~provided by~~used in operating activities for the first ~~nine months~~quarter of fiscal ~~2017~~2023 was ~~$0.3~~$5.0 million and consisted of ~~net cash provided by changes in operating assets and liabilities of $1.3 million and a~~our net loss of $2.8 million adjusted for non-cash expense items ~~of $1.0 million. Cash~~and net cash used byin changes in ~~operating assets and liabilities consisted~~working capital of ~~an increase~~$2.0 million, the largest of ~~$0.8~~which was a $2.5 million decrease in accounts receivable due to the increase in lighting revenue and the timing of collections from customers at period end, an increase of inventory by $0.2 million due to the timing of product shipments at quarter end, a decrease of $0.7 million in accrued expenses due to the payment of a state tax liability and an increase in deferred contract costs of $1.3 million due to the timing of project completions. Cash provided by changes in operating assets and liabilities included an increase of $0.6 million in accounts payable due to the timing of payments on balances at quarter end, a decrease in prepaid and other assets of $3.3 million primarily due to the timing of project billings, and an increase in deferred revenue of $0.4 million due to the timing of project completions.

payable.

Cash Flows Related to Investing ~~Activities.~~Activities. Cash used byin investing activities ~~was $0.5~~of $0.4 million in the first ~~nine months~~quarter of fiscal ~~2018 which~~2024 consisted primarily of purchases of property and ~~equipment and additions to patents and licenses.~~

equipment.

Cash ~~provided by~~used in investing activities ~~was $2.0~~of $0.1 million in the first ~~nine months~~quarter of fiscal ~~2017 which~~2023 consisted primarily of ~~$2.6 million~~purchases of proceeds from the sale of the Manitowoc manufacturing facility. Cash used by investing activities for the first nine months of fiscal 2017 was $0.4 million for capital improvements related to production enhancementsproperty and ~~technology purchases and $0.2 million of additions to patents.~~

equipment.

Cash Flows Related to Financing Activities. Cash used inby financing activities ~~was $3.1 million for~~of $3 thousand in the first ~~nine months~~quarter of fiscal ~~2018 and was due almost entirely to the net repayment~~2024 consisted primarily of ~~our revolving credit facility.~~

payment of long-term debt.

Cash provided by financing activities ~~was $1.3 million for~~of $48 thousand in the first ~~nine months~~quarter of fiscal ~~2017. This included $0.8 million~~2023 consisted primarily of ~~cash used for the repayment of long-term debt, $11,000 for stock option exercises and stock related tax settlements, and net~~ proceeds from ~~the revolving credit facility of $2.2 million.~~

employee equity exercises.

Working Capital

Our net working capital as of ~~December 31, 2017~~June 30, 2023 was ~~$13.4~~$20.6 million, consisting of ~~$30.6~~$43.0 million in current assets and ~~$17.2~~$22.3 million in current liabilities. Our net working capital as of March 31, ~~2017~~2023 was ~~$25.5~~$25.9 million, consisting of ~~$43.9~~$50.4 million in current assets and ~~$18.4~~$24.5 million in current liabilities. Our current accounts receivable balance decreased by $0.5 million from the fiscal 2017 year end due to the decline in sales and the timing of customer collections. Our inventory decreased from the fiscal 2017 year end by $4.8 million due to continued management of purchasing activities and inventory management initiatives. Our prepaid and other current assets decreased by $1.3 million due to a decrease in unbilled revenue as a result of the timing of customer billings. Our accounts payable remained relatively flat compared to fiscal 2017 year end. Our accrued expenses decreased from our fiscal 2017 year end by $0.8 million due to the payment of commissions and a decrease in accrued bonuses in the current fiscal year.

We generally attempt to maintain at least a three-month supply of on-hand inventory of purchased components and raw materials to meet anticipated demand, as well as to reduce our risk of unexpected raw material or component shortages or supply interruptions. Because of recent supply chain challenges, we have been making additional incremental inventory purchases. Our accounts receivables, inventory and payables may increase to the extent our revenue and order levels increase.

Indebtedness

Revolving Credit Agreement

~~We have an amended~~

On December 29, 2020, we entered into a new $25 million Loan and Security Agreement (the “Credit Agreement”) with Bank of America, N.A., as lender (the “Lender”). The Credit Agreement replaced our prior $20.15 million secured revolving credit and security agreement ("(the “Prior Credit ~~Agreement"~~Agreement”) ~~that~~.

The replacement of the Prior Credit Agreement with the Credit Agreement provides us with increased financing capacity and liquidity to fund our operations and implement our strategic plans.

The Credit Agreement provides for a five-year $25.0 million revolving credit facility ("(the “Credit Facility”) that matures on December 29, 2025. Borrowings under the Credit ~~Facility")~~Facility are subject to a borrowing base requirement based on eligible receivables, inventory and ~~inventory.~~cash. As of ~~December 31, 2017 our~~June 30, 2023, the borrowing base ~~was approximately $3.8 million. The Credit Facility has a maturity date~~ of February 6, 2019 and includes a $2.0 million sublimit for the issuance of letters of credit. As of December 31, 2017, we had no outstanding letters of credit. Borrowings outstanding as of December 31, 2017, amounted to approximately $3.6 million and are included in non-current liabilities in the accompanying condensed consolidated balance sheet. We estimate that as of December 31, 2017, we were eligible to borrow an additional $0.2 million under the Credit Facility ~~based upon current levels~~supports $18.6 million of ~~eligible inventory and accounts receivable.~~

~~Subject in each case to our applicable borrowing base limitations, the Credit Agreement otherwise provides for a $15.0~~availability, with $8.6 million ~~Credit Facility. This limit may increase to $20.0~~of remaining availability net of $10.0 million based on a borrowing base requirement, if we satisfy certain conditions. We did not meet the requirements to increase the borrowing limit to $20.0 million as of July 31, 2017, the most recent measurement date.

From and after any increase in the Credit Facility limit from $15.0 million to $20.0 million, the Credit Agreement requires that we maintain, as of the end of each month, a minimum ratio for the trailing twelve-month period of (i) earnings before interest, taxes, depreciation and amortization, subject to certain adjustments, to (ii) the sum of cash interest expense, certain principal payments on indebtedness and certain dividends, distributions and stock redemptions, equal to at least 1.10 to 1.00. borrowed.

The Credit Agreement contains additional customary covenants, including certain restrictions on our ability to incur additional indebtedness, consolidate or merge, enter into acquisitions, guarantee obligations of third parties, make loans or advances, declare or pay any dividend or distribution on our stock, redeem or repurchase shares of our stock, or pledge or dispose of assets. We were in compliance with our covenants in the Credit Agreement as of December 31, 2017.

~~Each of our subsidiaries is a joint and several co-borrower or guarantor under the Credit Agreement, and the~~ Credit Agreement is secured by a first lien security interest in substantially all of our assets.

Effective November 4, 2022, we, along with the Lender, executed Amendment No. 1 to the Credit Agreement. The primary purpose of the amendment was to include the assets of our acquired subsidiaries, Stay-Lite Lighting and ~~each subsidiary’s personal property (excluding various~~Voltrek as secured collateral under the Credit Agreement. Accordingly, eligible assets ~~relating to customer OTAs)~~of Stay-Lite and ~~a mortgage on certain real property.~~

~~Borrowings~~Voltrek are now included in our borrowing base calculation for the purpose of establishing our monthly borrowing availability under the Credit Agreement. The amendment also clarified that the earn-out liabilities associated with the Stay-Lite and Voltrek transactions are permitted under the Credit Agreement ~~bear interest at~~and that the ~~daily three-month LIBOR plus 3.0% per annum,~~expenses recognized in connection with ~~a minimum interest charge for each year or portion~~those earn-outs should be added back in the computation of a year during the term of the Credit Agreement of $0.1 million, regardless of usage. As of September 30, 2017, the interest rate was 4.69%. We must pay an unused line fee of 0.25% per annum of the daily average unused amount of the Credit Facility and a letter of credit fee at the rate of 3.0% per annum on the undrawn amount of letters of credit outstanding from time to timeEBITDA, as defined, under the Credit ~~Facility.~~

~~Capital Spending~~

Our capital expenditures are primarily for general corporate purposes for our corporate headquarters and technology center, production equipment and tooling and for information technology systems. Our capital expenditures totaled $0.5 million and $0.4 million for the nine-month periods ended December 31, 2017 and 2016, respectively. We plan to incur approximately $0.6 million in capital expenditures in fiscal 2018. We expect to finance these capital expenditures primarily through our existing cash, equipment secured loans and leases, to the extent needed, long-term debt financing, or by using our available capacity under our Credit Facility.

Agreement.

Backlog

Backlog represents the amount of revenue that we expect to realize in the future as a result of firm, committed purchase orders. Backlog totaled ~~$6.8~~$19.0 million and ~~$7.3~~$17.2 million as of ~~December 31, 2017~~June 30, 2023 and March 31, ~~2017,~~2023, respectively. We generally expect our backlog to be recognized as revenue within one year.

Backlog does not include any amounts for contracted maintenance services.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Inflation

~~Our~~

We have experienced increases in various input costs including labor, components and transportation in the past year. In response, we have implemented multiple price increases, and we have substantially mitigated the inflationary pressures, such that our results from operations have not been ~~and we do not expect them to be,~~ materially affected to date by inflation.

We are monitoring input costs and cannot currently predict the future impact on our operations by increasing or ongoing inflationary pressures.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires us to make certain estimates and judgments that affect our reported assets, liabilities, revenue and expenses, and our related disclosure of contingent assets and liabilities. We re-evaluate our estimates on an ongoing basis, including those related to revenue recognition, inventory valuation, ~~collectability of receivables,~~ stock-based compensation ~~warranty reserves~~ and income taxes. The estimates of forecasted cash flows are used in the assessment for impairment of long-lived assets and the realizability of deferred tax assets. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. A summary of our critical accounting policies is set forth in the “Critical Accounting Policies and Estimates” section of our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended March 31, ~~2017.~~2023. For the ~~three months~~quarter ended ~~December 31, 2017,~~June 30, 2023, there were no material changes in our accounting policies.

Recent Accounting Pronouncements

For a complete discussion of recent accounting pronouncements, refer to Note 23 in the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements included elsewhere in this report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk was discussed in the “Quantitative and Qualitative Disclosures About Market Risk” section contained in our Annual Report on Form 10-K for the year ended March 31, ~~2017.~~2023. There have been no material changes to such exposures since March 31, ~~2017.~~

2023.


~~ITEM 4.~~	~~CONTROLS AND PROCEDURES~~

~~Material Weaknesses on Internal Control over Financial Reporting~~

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our ~~management is responsible for establishing~~disclosure controls and ~~maintaining adequate internal control over financial reporting (as defined~~procedures are designed to ensure that information required to be disclosed by us in ~~Rules 13a-15(f) and 15d-15(f)~~the reports that we file or submit under the Exchange ~~Act). Internal control over financial reporting~~Act is ~~a process designed by, or under the supervision of,~~accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, ~~or persons performing similar functions, and effected by the board~~as appropriate, to allow timely decisions regarding required disclosure.

As of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:


i.	~~pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;~~


~~ii.~~	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and


~~iii.~~	~~provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.~~

~~Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any~~June 30, 2023, an evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

~~Under~~was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, ~~our management has assessed~~of the effectiveness of our ~~internal control over financial reporting based on the criteria set forth~~disclosure controls and procedures (as defined in ~~the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations~~Rule 13a-15(e) and Rule 15d-15(e) of the ~~Treadway Commission (COSO)~~Exchange Act).

~~As previously disclosed under "Item 9A. Controls and Procedures" in our Annual Report~~ Based on Form 10-K for our fiscal year ended March 31, 2017, we identified the following material weaknesses that existed as of March 31, 2017 and continued to exist at December 31, 2017. A material weakness is a control deficiency or a combination of control deficiencies that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

~~Information & Communication.~~ We determined that our controls pertaining to information and communication did not operate effectively, resulting in a material weakness pertaining to these COSO components. Specifically, we did not have sufficient communication of the status and evolution of a project to ensure timely and accurate recognition of project costs. In addition, we did not have sufficient communication and resolution of matters identified through management’s review impacting the accounting close as noted in the Control Activities discussion below.

~~Control Activities - Accounting Close.~~ The operating effectiveness of our controls were inadequate to ensure that project costs were identified and recorded to expense in a timely manner. In addition, matters identified through management review controls were not brought to a timely resolution.

~~Because of the material weaknesses described above, in consultation with management, our Chief Executive Officer and Chief Financial Officer~~this evaluation, such officers have concluded that ~~we did not maintain effective internal control over financial reporting and~~ our disclosure controls and procedures were ~~not~~ effective as of ~~March 31, 2017 and December 31, 2017, based on the criteria in Internal Control - Integrated Framework (2013) issued by COSO.~~

For the year ended March 31, 2017 and subsequent interim periods, we enhanced our closing procedures to ensure that, in all material respects, our financial statements are presented in conformity with GAAP and free of material misstatement as of and for the periods ended March 31, 2017 and December 31, 2017.

~~Plans for Remediation of March 31, 2017 Material Weaknesses~~

Our Board, our Audit & Finance Committee and management have identified additional resources to assist in the remediation effort and are developing and implementing new processes, procedures and internal controls to remediate the material weaknesses that existed in our internal control over financial reporting as it related to project cost accounting and the accounting close, and our disclosure controls and procedures, as of March 31, 2017 and December 31, 2017.

We have developed a remediation plan (the “Remediation Plan”) to address the material weaknesses for the affected areas presented above. The Remediation Plan ensures that each area affected by a material control weakness is put through a comprehensive remediation process. The Remediation Plan entails a thorough analysis which includes the following phases:

~~Ensure a thorough understanding of the “as is” state, process owners, and procedural or technological gaps causing the deficiency;~~

Design and evaluate a remediation action for the review and analysis of project costs; validate or improve the related policy and procedures; evaluate skills of the process owners with regard to the policy and adjust as required;

~~Implement specific remediation actions: train process owners, allow time for process adoption and adequate transaction volume for next steps;~~

~~Test and measure the design and effectiveness of the remediation actions; test and provide feedback on the design and operating effectiveness of the controls; and~~

~~Review and acceptance of completion of the remediation effort by executive management and the Audit & Finance Committee.~~

~~We have have taken or are in the process of taking the following steps toward implementation of the Remediation Plan:~~

~~Developed a regular method for the evaluation of actual project costs incurred against budgeted costs and for the communication of such costs and project status;~~

~~Revisited the method in which projects are reviewed and evaluated by the accounting department to ensure the accurate and timely recording of necessary adjustments;~~

~~Formalized and strengthened management review controls as they pertain to the accounting close;~~

~~Provided training to key process owners;~~

~~Enhanced information technology reporting capabilities, where possible, to ensure consistent, accurate data to support accounting close processes in a timely and efficient manner; and~~

~~Continue to refine documentation of policies and procedures related to project accounting, account reconciliations, and other key areas within the accounting close.~~

The Remediation Plan is being administered by our Chief Financial Officer and involves key leaders from across the organization. The Chief Financial Officer is providing regular updates on the status of the remediation to our Audit and Finance Committee. While progress has been made, we continue to refine the new and enhanced processes and controls, finalize revisions to policies and procedures and provide additional training to our employees. Furthermore, many of these enhanced processes and controls have not yet operated for a sufficient period of time to conclude they are operating effectively, therefore the material weaknesses may continue to exist.

We will continue to monitor the effectiveness of our internal control over financial reporting in the areas affected by the material weaknesses described above and employ any additional tools and resources deemed necessary to ensure that our financial statements are fairly stated in all material respects.

June 30, 2023.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting ~~during~~(as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) for the quarter ended ~~December 31, 2017,~~June 30, 2023, that ~~have~~ materially affected, or are reasonably likely to materially affect, our internal control over financial ~~reporting, other than with respect to the implementation of our Remediation Plans, as described above.~~

reporting.

PART II – OTHER INFORMATION


~~ITEM 1.~~	~~LEGAL PROCEEDINGS~~

ITEM 1. LEGAL PROCEEDINGS

We are subject to various claims and legal proceedings arising in the ordinary course of business. As of the date ~~hereof,~~of this report, we ~~are unable to currently assess whether~~do not believe that the final resolution of any of such claims or legal proceedings ~~may~~will have a material adverse effect on ~~Orion’s~~our future results of operations.

See Note ~~14, "Commitments~~15 – Commitments and Contingencies, ~~- Litigation",~~ to the Condensed Consolidated Financial Statements in Item 1 of this Quarterly Report on Form 10-Q.


~~ITEM 1A.~~	~~RISK FACTORS~~

ITEM 1A. RISK FACTORS

We operate in a rapidly changing environment that involves a number of risks that could materially affect our business, financial condition or future results, some of which are beyond our control. In addition to the other information set forth in this Quarterly Report on Form 10-Q, the risks and uncertainties that we believe are most important for you to consider are discussed in Part I - Item 1A under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2017,~~2023, which we filed with the SEC on June ~~13, 2017~~12, 2023 and in Part 1 - Item 2 under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Form 10-Q.


~~ITEM 2.~~	~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None


~~ITEM 5.~~	~~OTHER INFORMATION~~

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

(a)

Exhibits


~~ITEM 6.~~ 31.1	~~EXHIBITS~~

~~(a)Exhibits~~



~~31.1~~	Certification of Chief Executive Officer of Orion Energy Systems, Inc. pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.+

31.2	Certification of Chief Financial Officer of Orion Energy Systems, Inc. pursuant to Rule 13a-14(a) or Rule 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.+

32.1	Certification of Chief Executive Officer of Orion Energy Systems, Inc. pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.+

32.2	Certification of Chief Financial Officer of Orion Energy Systems, Inc. pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.+

101.INS	Inline XBRL Instance ~~Document~~Document+

101.SCH	Inline XBRL Taxonomy extension schema ~~document~~document+

101.CAL	Inline XBRL Taxonomy extension calculation linkbase ~~document~~document+

~~101.LAB~~ 101.DEF	Inline XBRL Taxonomy extension definition linkbase document+

101.LAB	Inline XBRL Taxonomy extension label linkbase ~~document~~document+

101.PRE	Inline XBRL Taxonomy extension presentation linkbase ~~document~~

document+

+ 104	~~Filed herewith~~ The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, has been formatted in Inline XBRL.

+ Filed herewith

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on ~~February 7, 2018.~~

August 9, 2023.



ORION ENERGY SYSTEMS, INC. ~~Registrant~~

By		/s/ ~~William T. Hull~~J. Per Brodin
		~~William T. Hull~~ J. Per Brodin
		Chief Financial Officer
		(Principal Financial Officer and Authorized Signatory)



Wisconsin		39-1847269
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification number)



2210 Woodland Drive, Manitowoc, Wisconsin		54220
(Address of principal executive offices)		(Zip code)



Large accelerated filer	o ☐	Accelerated filer	o ☐

Non-accelerated filer	o ~~(Do not check if a smaller reporting company)~~ ☒	Smaller reporting company	ý ☒

		Emerging growth company	o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o			☐



		Page(s)
PART I FINANCIAL INFORMATION		3
ITEM 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets as of ~~December 31, 2017~~June 30, 2023 and March 31, ~~2017~~2023	3
	Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~December 31, 2017~~June 30, 2023 and ~~December 31, 2016~~June 30, 2022	4
	Condensed Consolidated Statements of Shareholders’ Equity for the Three Months Ended June 30, 2023 and June 30, 2022	5
	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~December 31, 2017~~June 30, 2023 and ~~December 31, 2016~~June 30, 2022	5 6
	Notes to the Condensed Consolidated Financial Statements	6 7
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21 20
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	33 27
ITEM 4.	Controls and Procedures	34 27
PART II OTHER INFORMATION		36 28
ITEM 1.	Legal Proceedings	36 28
ITEM 1A.	Risk Factors	36 28
ITEM 2.	Unregistered ~~Sale~~Sales of Equity Securities and Use of Proceeds	36 28
ITEM 5.	Other Information	36 28
ITEM 6.	Exhibits	37 29
~~SIGNATURES~~SIGNATURE		38
~~Exhibit 31.1~~
~~Exhibit 31.2~~
~~Exhibit 32.1~~
~~Exhibit 32.2~~
~~EX-101 INSTANCE DOCUMENT~~
~~EX-101 SCHEMA DOCUMENT~~
~~EX-101 CALCULATION LINKBASE DOCUMENT~~
~~EX-101 LABELS LINKBASE DOCUMENT~~
~~EX-101 PRESENTATION LINKBASE DOCUMENT~~		30



	December 31, 2017			March 31, 2017
Assets
Cash and cash equivalents	$	10,563		$	17,307
Accounts receivable, net	8,663			9,171
Inventories, net	8,771			13,593
Deferred contract costs	1,115			935
Prepaid expenses and other current assets	1,543			2,877
Total current assets	30,655			43,883
Property and equipment, net	13,213			13,786
Other intangible assets, net	3,054			4,207
Other long-term assets	121			175
Total assets	$	47,043		$	62,051
Liabilities and Shareholders’ Equity
Accounts payable	$	11,685		$	11,635
Accrued expenses and other	5,155			5,988
Deferred revenue, current	277			621
Current maturities of long-term debt	85			152
Total current liabilities	17,202			18,396
Revolving credit facility	3,622			6,629
Long-term debt, less current maturities	125			190
Deferred revenue, long-term	946			944
Other long-term liabilities	509			442
Total liabilities	22,404			26,601
Commitments and contingencies
Shareholders’ equity:
Preferred stock, $0.01 par value: Shares authorized: 30,000,000 at December 31, 2017 and March 31, 2017; no shares issued and outstanding at December 31, 2017 and March 31, 2017	—			—
Common stock, no par value: Shares authorized: 200,000,000 at December 31, 2017 and March 31, 2017; shares issued: 38,347,325 at December 31, 2017 and 37,747,227 at March 31, 2017; shares outstanding: 28,916,170 at December 31, 2017 and 28,317,490 at March 31, 2017	—			—
Additional paid-in capital	154,758			153,901
Treasury stock, common shares: 9,431,155 at December 31, 2017 and 9,429,737 at March 31, 2017	(36,085		)	(36,081		)
Shareholder notes receivable	—			(4		)
Retained deficit	(94,034		)	(82,366		)
Total shareholders’ equity	24,639			35,450
Total liabilities and shareholders’ equity	$	47,043		$	62,051


x	~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~


¨	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~



	Three Months Ended December 31,						Nine Months Ended December 31,
	2017			2016			2017			2016
Product revenue	$	15,993		$	19,259		$	41,883		$	52,286
Service revenue	1,270			1,358			3,360			2,635
Total revenue	17,263			20,617			45,243			54,921
Cost of product revenue	11,181			13,577			30,587			36,748
Cost of service revenue	966			885			3,209			1,748
Total cost of revenue	12,147			14,462			33,796			38,496
Gross profit	5,116			6,155			11,447			16,425
Operating expenses:
General and administrative	2,878			3,541			11,370			11,040
Impairment of intangible assets	—			—			710			—
Sales and marketing	2,981			3,147			9,241			9,167
Research and development	616			495			1,519			1,493
Total operating expenses	6,475			7,183			22,840			21,700
Loss from operations	(1,359		)	(1,028		)	(11,393		)	(5,275		)
Other income (expense):
Other income	—			—			—			190
Interest expense	(102		)	(65		)	(308		)	(203		)
Interest income	5			7			12			31
Total other (expense) income	(97		)	(58		)	(296		)	18
Loss before income tax	(1,456		)	(1,086		)	(11,689		)	(5,257		)
Income tax benefit	(23		)	—			(23		)	(261		)
Net loss	$	(1,433	)	$	(1,086	)	$	(11,666	)	$	(4,996	)
Basic net loss per share attributable to common shareholders	$	(0.05	)	$	(0.04	)	$	(0.41	)	$	(0.18	)
Weighted-average common shares outstanding	28,909,847			28,258,742			28,734,394			28,106,209
Diluted net loss per share	$	(0.05	)	$	(0.04	)	$	(0.41	)	$	(0.18	)
Weighted-average common shares and share equivalents outstanding	28,909,847			28,258,742			28,734,394			28,106,209


	Shareholders’ Equity
	Common Stock
	Shares		Additional Paid-in Capital		Treasury Stock			Retained Deficit			Total Shareholders’ Equity
Balance, March 31, 2023		32,295,408	$	160,907	$	(36,237	)	$	(91,421	)	$	33,249
Shares issued under Employee Stock Purchase Plan		699		—		1			—			1
Stock-based compensation		206,451		188		—			—			188
Net loss		—		—		—			(6,637	)		(6,637	)
Balance, June 30, 2023		32,502,558	$	161,095	$	(36,236	)	$	(98,058	)	$	26,801



	Cost		Reserve			Net
As of December 31, 2017
Raw materials and components	$	6,655	$	(1,406	)	$	5,249
Work in process	1,316		(351		)	965
Finished goods	4,385		(1,828		)	2,557
Total	$	12,356	$	(3,585	)	$	8,771

As of March 31, 2017
Raw materials and components	$	8,104	$	(1,807	)	$	6,297
Work in process	1,918		(329		)	1,589
Finished goods	7,044		(1,337		)	5,707
Total	$	17,066	$	(3,473	)	$	13,593



	December 31, 2017		March 31, 2017
Unbilled accounts receivable	$	1,034	$	2,226
Other prepaid expenses	509		651
Total	$	1,543	$	2,877



	December 31, 2017			March 31, 2017
Equipment	$	581		$	581
Less: accumulated depreciation and amortization	(308		)	(202		)
Equipment, net	$	273		$	379



	December 31, 2017							March 31, 2017
	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Patents	$	2,702	$	(1,331	)	$	1,371	$	2,658	$	(1,211	)	$	1,447
Licenses	58		(58		)	—		58		(58		)	—
Trade name and trademarks	1,005		—			1,005		1,715		—			1,715
Customer relationships	3,600		(3,286		)	314		3,600		(3,054		)	546
Developed technology	900		(546		)	354		900		(426		)	474
Non-competition agreements	100		(90		)	10		100		(75		)	25
Total	$	8,365	$	(5,311	)	$	3,054	$	9,031	$	(4,824	)	$	4,207



Fiscal 2018 (period remaining)	$	138
Fiscal 2019	449
Fiscal 2020	363
Fiscal 2021	289
Fiscal 2022	191
Fiscal 2023	166
Thereafter	453
Total	$	2,049



	December 31, 2017	December 31, 2016
Common stock options	709,667	1,561,953
Restricted shares	1,545,209	1,661,543
Total	2,254,876	3,223,496



	Shares Issued Under ESPP Plan	Closing Market Price
Quarter Ended June 30, 2017	2,150	$1.28
Quarter Ended September 30, 2017	2,681	$1.12
Quarter Ended December 31, 2017	3,446	$0.88
Total issued in fiscal 2018	8,277	$0.88 - 1.28



	Restricted Shares		Stock Options
Balance at March 31, 2017	1,704,543		1,520,953
Awards granted	730,410		—
Awards vested	(592,851	)	—
Awards forfeited	(296,893	)	(811,286	)
Awards outstanding at December 31, 2017	1,545,209		709,667
Per share price on grant date	$0.88 - $1.95		—



	Revenues				Operating Income (Loss)
	For the Three Months Ended December 31,				For the Three Months Ended December 31,
	2017		2016		2017			2016
Segments:
Orion U.S. Markets	$	2,168	$	5,368	$	(520	)	$	367
Orion Engineered Systems	7,316		8,288		185			(81		)
Orion Distribution Services	7,779		6,961		224			229
Corporate and Other	—		—		(1,248		)	(1,543		)
	$	17,263	$	20,617	$	(1,359	)	$	(1,028	)



	Revenues				Operating Income (Loss)
	For the Nine Months Ended December 31,				For the Nine Months Ended December 31,
	2017		2016		2017			2016
Segments:
Orion U.S. Markets	$	6,388	$	16,462	$	(2,970	)	$	558
Orion Engineered Systems	18,857		22,062		(2,891		)	(878		)
Orion Distribution Services	19,998		16,397		(564		)	(132		)
Corporate and Other	—		—		(4,968		)	(4,823		)
	$	45,243	$	54,921	$	(11,393	)	$	(5,275	)



	March 31, 2017		Additions		Amounts Used			December 31, 2017
Employee separation costs	$	—	$	1,876	$	(1,635	)	$	241
Post-employment medical benefits (1)	—		143		(4		)	139
Total	$	—	$	2,019	$	(1,639	)	$	380